RE:RE:RE:RE:RE RIGHTS OFFERINGI'm trying to figure out what happens to the stock price after the 01/28 "Record Date" for the Rights. If I'm interpreting this correctly, the MWX stock continues to trade and the Rights start trading as symbol MWXRT. If 1 Right represents the ability to buy 1 share at 1.5 cents, then it seems that either Mineworx stock will drop or the Rights will trade higher or both. My initial thought is that the stock will drop and the Rights will trade higher.
If the market is efficient, then the price of 1 Right should be approximately 1.5 cents less than the price of 1 share. If they vary much from the 1.5 cent difference, then to me it would seem that arbitrage would occur and you could sell one to buy the other to gain an increased position. For this reason, I think the stock and Rights could remain relatively close to the 1.5 cent difference.
THOUGHT EXPERIMENT: If MWX stock is currently at $0.06, then someone who owns 100,000 shares TODAY at $0.06 would have a portfolio value of $6,000. After the Record Date, that same shareholder would have 100,000 shares + 100,000 rights, but I'm "suspecting" the total value of all would be the same $6,000. This would mean that the MWX shares would drop to a price of $0.0425 and the Rights trading on the exchange would go to $0.0275. This pricing would give the shareholder the same $6,000 portfolio value with their 100,000 shares + 100,000 rights and it would maintain the 1.5 cents difference.
Now, there are shareholders like myself who reside in the U.S. and have to jump through hoops to qualify for this Rights offering. I'm trying to figure out whether I should dump my position and buy back after the Record Date and avoid the whole messy issue.
Does anyone have thoughts on my example above? Do you see errors in my though experiment or other considerations that I have missed?