Last week, I bought 3,000 shares of Ezra on 14 Sep 10. Although it was not a nice uptrending stock, the volatility is decent to make a potential profit. In other words, everytime the stock breaks a resistance, the price movement is large enough for a profit taking.
On the following day, I realised Ezra executed a Rights Issue. Ezra offred 1 stock at $1.18 for every 5 stocks held by shareholders. With 3,000 shares, I would be getting 600 shares (1 for 5). The 600 shares were distributed to my account and it was the same day I realised Ezra is making rights issue! Too late to do anything.
To make things worse, my stop loss for the 3,000 shares was triggered. Instead of having 3,600 shares, I was left with 600 shares. According to the chart, my stop loss would not have triggered as the price actually went up during the rights issue (it closed at $1.74 on 15 Sep). Puzzled, I went to ask my broker and he pointed out from the activity log that it was me that placed a LIMIT order to sell at $1.65. I was dumbfounded as I would never have keyed in a LIMIT order when I am trading. I always used stop orders. But the proof was there, the time, the date, the user and the order details were all captured. Guessed I made the mistake – turning profit into a loss.
And what to do with the 600 shares? I cannot place orders to sell because it is an odd lot. Called my broker to dispose them and he told me the firm will market make, buying from me, consolidate and sell to the market. He says the traded price may deviate 5-10% from the market price. This is crazy. 5-10%! But no choice, an odd lot will always have to take a bigger spread to get rid of. To my relief, it was sold at $1.70, about 2.3% spread.
[Free Ebook] How should you invest your first $20,000?
We asked 14 Singapore finance bloggers to share what they would do if they could go back in time and invest their first $20,000. They can no longer rewind time, but you can learn from their experience and hopefully start with a better footing.
Come to think of it, does a rights issue benefit shareholders? It seems like it only makes the owners and the brokers richer.
Will this happen next time? Probably. I should do my due dilligence to check for company announcements before trading any stocks. I am a lazy trader and hardworking investor, if you get what I mean.