CH Offshore Ltd. Announces Massive Rights Issue: Will it Save or Sink the Stock?

CH Offshore Ltd. (CH Offshore), a Singapore-incorporated company, has announced a proposed renounceable non-underwritten rights issue of up to 1,409,785,028 new ordinary shares [[1]]. This significant move could substantially alter the company’s shareholding structure and its listing status, making it a potentially price-sensitive event for investors.

Key Details of the Rights Issue:

• Issue Price: S\$0.01 per share [[1]]. This represents a discount of approximately 78.26% to the closing price on February 28, 2025, and 54.55% to the theoretical ex-rights price on the same day [[1]].
• Allotment Ratio: Two new shares for every one existing share held [[1]].
• Use of Proceeds: Primarily for increasing working capital and strengthening the Group’s financial position [[8]], potentially including fleet renewal or enhancement [[8]]. In the Maximum Scenario (full subscription), approximately 80% of net proceeds are earmarked for vessel acquisition or enhancement; this amount drops to between 20% and 100% in the Minimum Scenario [[10]].
• Non-Underwritten: The issue is not underwritten, meaning there’s no guarantee all shares will be subscribed [[2]]. The minimum amount to be raised is approximately S\$9.87 million [[4]].
• Scaling Provisions: CH Offshore may scale down subscriptions to avoid mandatory general offer obligations or transfers of controlling interest [[2]]. They may also scale down the Undertaking Shareholder’s excess shares to maintain the minimum public float required by the Singapore Exchange Securities Trading Limited (SGX-ST) [[2]].
• Undertaking Shareholder: BT Investment Pte. Ltd., a controlling shareholder, has provided an irrevocable undertaking to subscribe for its pro rata entitlement and up to an additional 15% of the rights shares [[5]].
• Eligibility: The rights issue is primarily for shareholders with registered addresses in Singapore [[6]]. Shareholders holding shares through CPF, SRS, or finance companies must apply through their respective agents [[6]]. Foreign shareholders are excluded [[7]].
• Free Float Risk: The minimum scenario (only the undertaking shareholder subscribing) could reduce the free float to 4.59%, potentially leading to a suspension of trading or delisting [[9]]. CH Offshore is exploring options to maintain its listing status [[9]].

Potential Share Price Impacts:

The significant discount offered and the large number of shares involved could attract significant interest, potentially boosting the share price. However, the non-underwritten nature of the issue and the risk of a reduced free float present considerable downside risk. The success of the rights issue hinges on participation from public shareholders. Low participation could significantly dilute existing shareholders’ holdings and severely impact the share price.

The company’s stated aim of using the proceeds for fleet renewal/enhancement may also influence investor sentiment, depending on market conditions and the perceived success of the strategy.

The current status of Energian and Falcon Energy (both substantial shareholders undergoing liquidation) could also influence investor perception and the eventual free float [[9]].

Disclaimer:

This article is for informational purposes only and does not constitute investment advice. The information provided is based on the publicly available announcement from CH Offshore Ltd. and should not be considered a recommendation to buy or sell any securities. Investors should conduct their own thorough due diligence before making any investment decisions.

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