FrasersComm Proposes Consolidation of Units - 9 NOV 2010

FrasersComm Proposes Consolidation of Units:

• Press Release

Key Points

• Consolidation of every five existing units in FCOT held by unitholders of FCOT as at a books closure date into one Unit. 
• The number of Consolidated Units which Unitholders will be entitled to will be rounded down to the nearest whole Consolidated Unit and any fractions of Consolidated Units arising from the Proposed Unit Consolidation will be disregarded. 
• Each Consolidated Unit will rank pari passu with each other.
• Rationale for the proposed unit consolidation:
• improvement in the market perception and attractiveness of FCOT and the Units
• reduction of the magnitude of volatility of FCOT’s Unit trading price and market capitalization

Author's Note

What I can gather from the press release:

1. If you are holding 1000 units of FCOT, then it will become 200 units.
2. If you are holding odd lots of say 996 units of FCOT, then the 995 units will become 190 units. The remaining 1 unit will be disregarded.
3. Though it is not explicitly mentioned, the consolidated unit should be worth 5 times the original price if we do not take the disregarded units into account. Based on the closing price of S$0.170 on 9 Nov 2010, the pricing of the new unit should be S$0.850. But this needs further clarifications from the manager as we do not know whether the number of disregarded units will have any significant impact.

This consolidation exercise will be subjected to unit holders' in an EGM to be convened. The date for the EGM and the book closure date for the consolidation exercise will be announced later.