Keppel Corp shares to trade ex-distribution on Feb 23; SGX says short sellers must deliver shares

SHARES of Keppel Corporation will trade ex-distribution when the market opens on Thursday (Feb 23), meaning those who buy the stock from that date will no longer be entitled to the distribution in specie of 19.1 Sembcorp Marine (Sembmarine) shares per Keppel share held. Investors should note changes to Keppel’s net tangible assets (NTA), while those who have sold Keppel short may need to factor in the Sembmarine shares when required to cover their positions.

In response to queries from The Business Times, the Singapore Exchange (SGX) explained that short sellers who had sold Keppel short before Feb 23 – that is, on a cum-distribution basis – will have to deliver Keppel cum-distribution shares when due. Failing that, they will have to deliver Keppel ex-distribution shares as well as Sembmarine shares.

Should the seller fail to deliver shares to the central depository (CDP), they will be subject to CDP’s failed settlement management.

“(This) includes buying-in – at a premium – and procurement of the shares for delivery to the buyer, at the seller’s cost,” the SGX spokesperson said. “Short sellers who fail to deliver shares are also subject to a failed trade penalty.”

The Business Times had earlier reported that the deal between Keppel and Sembmarine appears to have attracted the attention of short sellers. Short positions on Keppel had increased slightly in recent days, while short interest in Sembmarine was up significantly.

Following completion of the combination of Keppel Offshore & Marine (KOM) and Sembmarine on Feb 28, Keppel will receive 54 per cent or 36.8 billion shares of Sembmarine with a total implied value of about S$4.5 billion.

The sale of KOM will allow Keppel to book a disposal gain of S$3.4 billion.

But because Keppel is distributing the bulk of those shares (amounting to 49 per cent of Sembmarine shares) to its shareholders, and the implied value of that distribution is S$4.1 billion, Keppel’s NTA would fall. On a pro forma basis, the deal would have cut Keppel’s FY2022 NTA by S$0.28 per share – to S$5.23 from S$5.52.

Shares of Keppel closed 2.8 per cent or S$0.20 higher at S$7.34 on Wednesday, before the announcement.