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What are your thoughts on investing in the current Sydney Airport Entitlement offer? Is it worthwhile?
Alternatively if we sell our entitlements on the ASX under this current offer, how do you expect the capital gains to be treated on these entitlements sold? I assume the cost base of these entitlements are zero dollars, so we would pay tax on the full sale price, do you agree ?
A: Prima facie, you are mad if you either don’t exercise your rights and buy new shares in Sydney Airport at $4.56, or sell your renounceable rights on the ASX by Wed 26 August. Today, the shares closed at $5.40 and the rights (trading under SYDR) at $0.82. If you do nothing, there is a retail shortfall bookbuild which will mean that you get some payment at the back end of September.
I am not a huge fan of Sydney Airport at the moment (I don’t think the market is pricing in the long term competition risk from Western Sydney Airport and is potentially underestimating the challenges in getting people to fly again), so I would probably sell the rights. But, I am in the minority on this – the issue has been very well supported.
Yes, if you sell the rights, the amount will be considered to be a taxable capital gain (on the whole amount – no discount).
