Notice

Telstra Corporation Limited (TLS) $0.03 Special Dividend – Adjustment Implication for ETOs

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Notice reference number: 1155.21.08
Date published: 24/08/21
Effective as of: 25/08/21
Last updated: 24/08/21

Telstra Corporation Limited $0.03 Special Dividend – Adjustment implications for ETOs

ASX Notice No. 1105.21.08 dated 12 August 2021 described the adjustment method that applied to ETOs over Telstra Corporation Limited (ASX Code: TLS) relating to the $0.03 special dividend with ex-dividend date of 25 August 2021.

Effective Date

The effective date of the adjustment is Wednesday, 25 August 2021, when the underlying security commences trading on an ex-dividend basis.

ASX determined that the last cum-dividend VWAP based on trading on ASX markets on Tuesday, 24 August 2021 was $3.9523

Standard Method of Adjustment

For an old contract size of 100 shares, the new contract size will be adjusted, using TMC threshold truncation.

Theoretical New Contract Size = Old Contract Size + (total special dividend paid per Old Contract Size)/(S – OD – SD)

Theoretical New Contract Size = 100 + ($0.03*100)/($3.9523-$0.05-$0.03)

=100.7747 truncated to 100 where the difference of 0.7747 will be cash adjusted based on the below formula.

Strike Factor = Old Contract Size/Theoretical New Contract Size

Strike Factor = 100/100.7747

                                                       = 0.992313

Cash Equalisation Adjustment Payments for Contract Size Roundings

The cash adjustment is calculated by taking the difference between the contract value of the option before and after the adjustment.  Variants to the formula apply for rights style adjustments and when the adjustment occurs on the day of the option’s expiry.

Cash adjustment = (BOP * BUV) – (AOP * AUV)

Where

BUV =Before (adjustment) Unit Value = BP * BU rounded to nearest cent

AUV =After (adjustment) Unit Value = AP * AU rounded to nearest cent

BU = units per lot (multiplier) before the adjustment (old traded entity)

AU = units per lot (multiplier) after the adjustment (old traded entity)

BP = for rights style, =SP/Adjustment Factor, for non-rights style=SP.

AP = for rights style, =SP, for non-rights style=SP * Adjustment Factor.

SP = settlement price of the option if not the options expiry day, otherwise the intrinsic price (underlying price-strike price for calls, strike-underlying price for puts) if on expiry date.  Refer Notes 1 and 2 below

BOP =pre-adjusted open position Refer Notes 1 and 3 below

AOP =post-adjusted open position Refer Notes 1 and 3 below

Note:

1.     Cash adjustments on expiry will apply to exercised positions only.

2.     The intrinsic price used for exercised positions on expiry is based on the adjusted strike price for rights style adjustments and the pre-adjusted strike price for non-rights style adjustments.  Set negative intrinsic prices to zero i.e. if an out of the money is exercised, the intrinsic price and hence cash adjustment is zero.

3.     Pre and post adjusted positions will be the same unless there is a position adjustment factor applied to the open position associated with the adjustment.  For rights style use the start of day position (i.e. exclude any UA trading activity), for non-rights style use the (end-of-day) position prior to the adjustment.

4.     Cash adjustments will also apply to LEPO positions.

5.        For short positions, the result of the cash adjustment formula should have its sign reversed (multiply by -1). For non-LEPO positions the truncation approach ensures that the seller (writer) is always debited and the buyer (taker) is credited.  Because the LEPO strike is usually returned to 1c after the adjustment, the holder of a short LEPO position may be credited and long position may be debited.

Refer to table below for adjusted strike and contract size

OLD SIZE

NEW SIZE

OLD STRIKE (CENTS)

NEW STRIKE (CENTS)

Exercise

100

100

1

1

E

100

100

188

187

A

100

100

190

189

A

100

100

192

191

A

100

100

194

193

A

100

100

196

194

A

100

100

198

196

A

100

100

204

202

A

100

100

210

208

A

100

100

212

210

A

100

100

214

212

A

100

100

216

214

A

100

100

218

216

A

100

100

224

222

A

100

100

230

228

A

100

100

232

230

A

100

100

234

232

A

100

100

236

234

A

100

100

238

236

A

100

100

240

238

A

100

100

241

239

E

100

100

244

242

A

100

100

248

246

A

100

100

251

249

A

100

100

253

251

A

100

100

255

253

A

100

100

258

256

A

100

100

260

258

A

100

100

263

261

A

100

100

264

262

A

100

100

267

265

A

100

100

270

268

A

100

100

272

270

A

100

100

273

271

E

100

100

274

272

A

100

100

277

275

A

100

100

280

278

A

100

100

282

280

A

100

100

283

281

E

100

100

284

282

A

100

100

287

285

A

100

100

289

287

A

100

100

290

288

A

100

100

291

289

A

100

100

292

290

E

100

100

294

292

A

100

100

295

293

A

100

100

297

295

A

100

100

298

296

A

100

100

300

298

A

100

100

301

299

A

100

100

304

302

A

100

100

305

303

A

100

100

306

304

E

100

100

307

305

A

100

100

308

306

A

100

100

310

308

A

100

100

311

309

A

100

100

312

310

E

100

100

314

312

A

100

100

315

313

A

100

100

316

314

E

100

100

317

315

A

100

100

318

316

A

100

100

320

318

A

100

100

321

319

A

100

100

322

320

E

100

100

324

322

A

100

100

325

323

A

100

100

326

324

E

100

100

327

324

A

100

100

328

325

A

100

100

330

327

A

100

100

331

328

A

100

100

332

329

E

100

100

334

331

A

100

100

335

332

A

100

100

336

333

E

100

100

337

334

A

100

100

338

335

A

100

100

338

335

E

100

100

340

337

A

100

100

341

338

A

100

100

344

341

A

100

100

345

342

A

100

100

345

342

E

100

100

346

343

E

100

100

347

344

A

100

100

348

345

E

100

100

350

347

A

100

100

351

348

E

100

100

353

350

A

100

100

354

351

E

100

100

357

354

A

100

100

358

355

E

100

100

360

357

A

100

100

361

358

E

100

100

363

360

A

100

100

364

361

E

100

100

367

364

A

100

100

368

365

E

100

100

369

366

A

100

100

370

367

A

100

100

370

367

E

100

100

371

368

E

100

100

372

369

A

100

100

373

370

E

100

100

376

373

A

100

100

377

374

E

100

100

379

376

A

100

100

380

377

A

100

100

380

377

E

100

100

381

378

E

100

100

382

379

A

100

100

383

380

E

100

100

386

383

A

100

100

389

386

A

100

100

390

387

A

100

100

390

387

E

100

100

391

388

E

100

100

392

389

A

100

100

393

390

E

100

100

396

393

A

100

100

397

394

E

100

100

399

396

A

100

100

400

397

A

100

100

400

397

E

100

100

401

398

E

100

100

402

399

A

100

100

403

400

E

100

100

405

402

A

100

100

406

403

A

100

100

406

403

E

100

100

408

405

A

100

100

409

406

E

100

100

410

407

A

100

100

411

408

A

100

100

411

408

E

100

100

412

409

A

100

100

413

410

E

100

100

414

411

A

100

100

415

412

E

100

100

416

413

A

100

100

418

415

A

100

100

419

416

E

100

100

420

417

A

100

100

421

418

E

100

100

422

419

A

100

100

423

420

E

100

100

424

421

A

100

100

425

422

E

100

100

426

423

A

100

100

428

425

A

100

100

429

426

E

100

100

430

427

A

100

100

432

429

A

100

100

433

430

E

100

100

434

431

A

100

100

435

432

E

100

100

436

433

A

100

100

438

435

A

100

100

440

437

A

100

100

442

439

A

100

100

443

440

A

100

100

446

443

A

100

100

447

444

A

100

100

448

445

A

100

100

448

445

E

100

100

450

447

A

100

100

451

448

A

100

100

453

450

A

100

100

456

452

A

100

100

457

453

A

100

100

458

454

A

100

100

460

456

A

100

100

461

457

A

100

100

462

458

E

100

100

463

459

A

100

100

466

462

A

100

100

467

463

A

100

100

468

464

A

100

100

469

465

E

100

100

470

466

A

100

100

471

467

A

100

100

472

468

E

100

100

473

469

A

100

100

475

471

A

100

100

476

472

A

100

100

477

473

E

100

100

480

476

A

100

100

481

477

E

100

100

485

481

A

100

100

486

482

A

100

100

487

483

E

100

100

490

486

A

100

100

491

487

E

100

100

495

491

A

100

100

511

507

A

100

100

512

508

E

100

100

520

516

A

100

100

526

522

A

100

100

535

531

A

100

100

536

532

E

100

100

588

583

A

100

100

589

584

E

100

100

597

592

A

100

100

598

593

E

100

100

608

603

A

100

100

609

604

E

100

100

613

608

A

100

100

614

609

E

100

100

622

617

A

100

100

623

618

E

Need more information?

Issued by

Brendan Laird, Senior Manager, Settlement Operations

Contact information

Darren Tay
1800 814 051
chesshelp@asx.com.au

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