Legal Framework


Q&A on the rolling model – 17 February 2018

Q1: During a rights issue, especially if highly-dilutive, do net short positions always represent material short positions?

During a rights issue, especially if the operation is highly dilutive, it may happen that some “technical” net short positions (“NSP”) are published. These technical NSPs stem from the arbitrage activity and do not represent a material net short position in the shares under rights issue.

This is due to the fact that, even if the arbitrageur has a flat position, he will be bound to report to Consob and have published a NSP equal to the shares sold short – where such NSP is equal to or higher than the reporting thresholds provided for in the Regulation EU no. 236/2012 and related implementing measures – given the rules for the calculation of the NSP, according to which the subscription rights are not considered long positions.

Moreover, NSPs have to be calculated taking into account the share capital as at the day before the start of the rights issue; this leads to an overestimation of the NSP especially when the rights issue is highly-dilutive. Such “technical” NSPs are closed when the newly issued shares (stemming from the subscription rights’ exercise) are received and are, therefore, of brief duration.

Until a change in the EU rules for the calculation of the NSP is made, it is therefore highlighted that such technical NSP do not represent a material net short position.

Finally, when reporting to Consob such “technical” NSPs, investors should indicate in the field “Comment” of the NSP that the position is backed by subscription rights (see Consob Communication no. 0088305 of 5 October 2016). 

Q2: Does the rolling model apply to the potential offer of the unexercised rights?

A2: No, the rolling model applies to the rights issue period only, and does not affect the subsequent and potential offer of the unexercised rights (so-called “inoptato” or “Rights Auction”). This means that the “inoptato” will  follow the standard model, with the issuance of the new shares only at the end of the rights issue.

Q3: In case of highly dilutive rights issue managed with the rolling model, how should the obligation to disclose major shareholdings (pursuant to Article 120  and following of the Italian Consolidated Law on Finance) be complied with?

A3: In case of highly dilutive rights issue managed with the rolling model, the disclosures of major shareholdings have to be made only at the end of the rights issue, taking into account the new share capital. In detail, such disclosures have to be made within the deadline provided by the law, which starts from the issuer’s press release regarding the filing, in the Italian Chamber of Commerce, of the new share capital.

The only exception to the above is when a shareholder, who holds a major shareholding before the start of the rights issue, sells all or part of its shares and, following these sales, its shareholding drops below a relevant threshold (calculated on the share capital as at the day before the start of the rights issue); in such situation, the shareholder shall have to report to Consob the change in its stake by the usual deadline running from the day of the sales; the counterparty of the trade will also be required to report to Consob the purchases, carried out off market, if its shareholding reaches a relevant threshold (calculated on the share capital before the start of the rights issue).