SembCorp Marine - Rights Issue

The discrepancies in pricing

Today, SembCorp Marine share rallied by 7-10% and an arbitrage opportunity appeared.

Currently, there is 144m rights being sold at SGD 0.001. It cost SGD 0.20 to subscribe for the rights. So we could technically buy SembCorp Marine at SGD 0.201 (net of broker fee).

There is currently a buying order of 3m shares at SGD 0.225. The trading summary is taken at half day mark.

Technically, we could have a risk free transaction by

  1. Selling short 3m shares at 0.225

  2. Buying 3m rights and converting them at 0.201

  3. Delivering the shares back

  4. Made SGD 0.024 per share.

  5. Multiply 3m on SGD 0.024 and we have a profit of … *Drumroll*

SGD 72,000!!!

Pure profit and “riskless”. But sadly, not executable as there is no SembCorp Marine shares for loan at this moment.

We do not hold any SembCorp Marine shares but if you do, now it is the time to do some averaging down!

If you want to maintain your stake in SembCorp Marine, sell all your SembCorp Marine shares and then exercise the rights to repurchase your original stake at a lower cost. At this point of writing, the shares are selling for SGD 0.215. For 100,000 shares, you would have lowered your SembCorp Marine cost by SGD 1,400*.

* Do take note that if you are holding very little shares, there is hardly any arbitrage left after broker fee.