Subscription shares have similar characteristics to warrants, in that they offer shareholders the right to purchase shares at specified future dates or during predetermined conversion periods at predetermined prices. Unlike warrants, subscription shares qualify for the stocks and shares component of an ISA and self invested personal pensions (SIPPs).
Investment in the Subscription Shares may not be suitable as a short-term investment. The value of a Subscription Share may go down as well as up.
Subscription Shares represent a geared investment, so a relatively small movement in the market price of the Ordinary Shares may result in a disproportionately large movement, unfavourable or favourable, in the market price of the Subscription Shares. The market price of the Subscription Shares may therefore be volatile. As a result, the value of your investments may fall suddenly and substantially. You could lose your entire investment and Subscription Shares could expire worthless if the net asset value of the Company is below the Final Exercise price of the Subscription Share at the end of the life of the Subscription Shares.
Movements in the price of Subscription Shares may not be in line with the movement in the price of the Ordinary Shares. The price of a Subscription Share may not move in line with that of an Ordinary share because other factors contributing to their respective prices, for example supply and demand, are not directly related to one another and hence are unlikely to change at the same time and in the same manner. Further, the price of a Subscription Share is affected by factors that do no affect Ordinary Share price, such as the remaining life of the Subscription Shares.
Subscription Shares, like warrants, lock in prices at which new ordinary shares may be subscribed for on future conversion dates or during predetermined conversion periods. As a holder of subscription shares, an investor can decide whether to subscribe for new ordinary shares on these dates. Investors would usually choose to convert their subscription share rights if the market price of an investment trust’s ordinary shares exceeds the conversion price by more than the subscription share price at the relevant conversion date.
For example, if the conversion price on the relevant conversion date was 150p and the market price of ordinary shares on that date was 100p, it would be anticipated that the subscription shares would not be converted. However, if the market price of ordinary shares on that date was 200p, it is likely that subscription shares would be converted.
Subscription shares can be bought and sold independently of the ordinary shares. Once issued, if an investor does not wish to retain their subscription shares, they can be sold on the stock exchange as they would sell any other security. Please note that due to their characteristics, subscription shares are not available for purchase through the
J.P. Morgan WealthManager+ Accounts or Classic Accounts.
The value given to subscription shares by traders is largely dependent on the underlying price of the ordinary shares that they are linked to. In general, this will increase as the price of the ordinary shares rises above the conversion price. Other factors that could influence the price include any stepped exercise prices, the time until conversion, share price volatility, interest rate movements and dividend yield.
J.P. Morgan has five investment trusts with subscription shares in issue. Full details of the conversion prices and how to convert are detailed on each of the trust pages, which can be accessed from the links below:
We have created a calculator to show you what subscription shares are worth using today’s price of the ordinary shares. It calculates today’s price against the conversion price for the next four years, therefore is only a guide.