Highly dilutive rights issues - CONSOB AND ITS ACTIVITIES
Highly dilutive rights issues – Rolling model
From 15 December 2016 highly dilutive rights issues started by Italian shares issuers listed on Borsa Italiana's regulated markets are be managed according to a new model called rolling model.
The implementation of the rolling model has been sponsored by Consob, following a number of consultations, with the aim of avoiding the occurrence of price anomalies on the concerned shares during highly dilutive rights issues. Price anomalies occurred during all main highly dilutive rights issues carried out from 2009 till 2016 (for instance, the operations launched by Saipem SPA in January 2016, by Banca MPS SPA in 2015 and 2014, by Fondiaria-Sai SPA in 2012, by Seat PG SPA and Tiscali SPA in 2009).
The new model, in short, provides for the following steps:
- Two working days before the start of the rights issue, the concerned issuer has to announce the terms of the capital increase;
- Borsa Italiana checks, on the basis of objective criteria set up by Consob and described in Borsa Italiana's Market Rules, if the rights issue has to be considered highly dilutive;
- If the rights issue is highly dilutive, Borsa Italiana informs to the market with a Notice that the rights issue will be managed using the rolling model; if the rights issue is not highly dilutive, the capital increase is managed according to the standard model (not rolling);
- Consob, shortly before the start of the highly dilutive rights issue, publishes a specific Warning on its website, whereby it announces the imminent launch of the highly dilutive rights issue to be managed with the rolling model;
- During the highly dilutive rights issue, it is possible to exercise the subscription rights in each day of the capital increase starting from the third day; the newly issued shares stemming from such "early" exercise are made immediately available; the early exercise has to be made in accordance with the procedures and within the time limits laid down in the Instructions for the CSD Service of Monte Titoli SPA, and with the contractual conditions agreed, case by case, with one's intermediary;
- The early delivery of the newly issued shares is aimed at allowing arbitrage activity between shares and subscription rights starting from the first day of the rights issue, as clarified in Consob Communication no. 88305 of 5 October 2016; in turn, the arbitrage activity should minimize the risk of having price anomalies;
- Alternatively, subscription rights can be exercised according to the standard model, i.e. with the delivery of the newly issued shares at the end of the rights issue.
The rolling model applies to rights issues only. Other kinds of capital increases (e.g. conversion of bonds; capital increases without the issuance of subscription rights) are never managed using the rolling model.
Moreover, it is worth highlighting that the rolling model can have an impact on the right to revoke the decision of subscribing the new shares, provided for in Article 95-bis, paragraph 2, of the Italian Consolidated Law on Finance (see Consob Communication no. 88305 of 5 October 2016).
Recent rights issues:
- Warning about the highly-dilutive rights issue of Banca MPS S.p.A. - Application of the rolling model (13 October 2022)
- Warning about the highly-dilutive rights issue of Saipem S.p.A. (23 June 2022)
- Warning about the highly-dilutive rights issue of Trevi Finanziaria Industriale S.p.A. - Application of the rolling model (30 April 2020)
- Warning about the highly-dilutive rights issue of Credito Valtellinese spa – Application of the rolling model and product governance (17 February 2018)
- Warning about the highly-dilutive rights issue of Banca Carige spa – Application of the rolling model (21 November 2017)
Here you can find additional resources on the rolling model:
- Consob Communication no. 88305 of 5 October 2016
- Borsa Italiana Market Rules dealing with the rolling model
- Monte Titoli Instructions for the CSD Service dealing with the rolling model
- Consob document "Esiti delle Consultazioni" of 28 April 2016 (Italian only) which provides for the adoption of the rolling model
- Consob consultation paper on the rolling model of 7 August 2014
- Consob consultation paper on the rolling model of 10 February 2020 (only Italian version)
Any question on the rolling model can be sent to: Consob - Market Division - Post-Trading Department (email@example.com).