Air New Zealand is raising $1.2 billion from investors to help fuel its recovery from the pandemic.
Its rights shares were trading at 51c this morning. How many rights were taken up would be known in May.
Harbour Asset Management portfolio manager Shane Solly said there had been some unusual pricing but this was settling down today.
"Maybe there is an opportunity for some people to trade the stock and take advantage of the differential price. [Today] is an important day when we will get real trading going on in the rights."
The Air New Zealand share register for the two for one renounceable rights offer has now closed and shareholders will know exactly how many rights they can trade.
Each Air New Zealand right represents an entitlement to subscribe for two new ordinary shares (at 53c a share) in the airline. A total of 1.122 billion rights have been issued and when exercised will result in the issue of 2.246 billion new shares.
Solly said shareholders have to remember they are paying and having to fund 53c times two (therefore $1.06) for the new shares in Air New Zealand.
Shareholders needed to have shares in Air New Zealand at the close of trading on Friday.
Owners have the right to buy two new shares at 53c a share. That was a 62 per cent discount on the $1.37 shares closed at before the announcement was made on Wednesday.
About 2.3 billion new Air New Zealand shares will be issued under the offer, which has caused confusion among some investors.
On Monday the company twice went into a trading halt as the NZX rectified the calculation of the limited rights reference price – from an initial 24.5c to 49c. The price adjustment reflected the correct ratio of one limited rights being exercised for two new Air New Zealand shares.
Matt Goodson, managing director of Salt Funds Management, described that as a strange day with shares trading as high as $1.07.
Whether the 77.5c price was right would be determined by the market.
"It's quite an unusual offer from Air New Zealand with one right allowing investors to bid for two shares, not one, in the airline. I think people don't quite understand that when the stock goes ex-rights they are buying something that will finish up having three times more shares on issue,'' he said.
"Why Air New Zealand's advisors chose to do it that way - you'd have to ask them.
"The shares are also traded heavily in Australia but there's no rights trading there – only in New Zealand. It's all a bit bizarre. Air New Zealand's current share price is well north of most analysts' estimates, and there clearly has been some misunderstanding."
Today he said retail investors in Australia had added to price volatility, many not realising the stock had gone ex-rights.
A rights issue is one way it can raise cash by selling more shares. It is seen as quite a fair way for retail investors.
But investors face plenty of risks to weigh up, Sharesies chief executive Leighton Roberts said in a Continuous Disclosure podcast today:
"There are lots of things investors might think about when deciding to invest and some of these are relevant to any company.
"They include the price of the shares versus what someone thinks they are worth and someone's time horizon."
Roberts says Air New Zealand has made it clear it won't be cashflow-positive for a while so it's going to be a long-term investment.
He says investors need to get clued up on what the company plans to do with the money while considering its track record and the risks of it being able to deliver on its plans in the future.