First REIT: Nil-paid rights start trading.

First REIT's nil-paid rights started its first day of trading at 22c but closed at 19.5c. This probably affected the mother share as First REIT was sold down to 70.5c. Why? Well, if we could buy the nil-paid rights at a bargain, why buy the mother share? Sell the mother share, buy the nil-paid rights and make some money on the difference.

So, if someone bought the nil-paid rights at 19.5c, including the 50c to be paid to exercise the rights, the total price is only 69.5c. Why should he pay 70.5c for the mother share?

Fundamentally, there is no compelling reason to sell below 70c as the yield is a handsome 9.14% at this price. However, if it does get sold down, I see immediate support at 69c which is where the rising 100dMA would be approximating soon. I might buy more then.

Related post:
First REIT: XR and fair value.