What Are Full Delivery Shares?
Full delivery share is a rating given to stocks on the Taiwan Stock Exchange. These stocks have a per-share book value below the exchange's required minimum of five New Taiwan dollars (TWD). Also, these illiquid shares are not included in the Taiwan Stock Exchange Corporation weighted index.
Full delivery shares are more commonly called full delivery stock or full delivery securities.
Understanding Full Delivery Shares
Full delivery shares represent a financially struggling company and have limited liquidity. Investors must pay in advance and in-full for these trades. Under existing securities trading regulations, margins are not allowed on full delivery shares. Due to the struggling company behind the shares, full delivery shares are a risky investment. The companies they represent may have no income or assets, and may even be in or near bankruptcy. However, some investors can handle the risk, and it is possible to make money on them. In the United States, such low-valued stocks are traded in over-the-counter or unlisted markets.
- Full delivery shares are shares with a per-share book value below five New Taiwan dollars (TWD).
- They have limited liquidity and investors must pay in advance for the shares.
- Foreign investors can obtain financing in New Taiwan Dollars to cover insufficient funds for settlement in Full Delivery Shares.
Foreign Investment in Taiwanese Full Delivery Shares
Foreign investors are not permitted to obtain financing in New Taiwan Dollars, with the sole exception of full delivery, special treatment, and warning stocks. Since July 23, 2004, Taiwanese financial institutions have been allowed to provide intra-day TWD financing to foreign investors to cover insufficient funds for settlement due to time zone differences. Pre-arrangement and pre-delivery of cash to a broker is required before trading.
In such a transaction, the custodian banks may, after booking foreign exchange by a foreign investor, payout TWD for the foreign investor during the trading day Taiwan time, and then receive the foreign currency payment on the trading day in the evening.
Example of Full Delivery Shares
In November 2016, after two fatal crashes within seven months of each other, TransAsia Airways was downgraded to full delivery stock. TransAsis was the first listed company on Taiwan’s primary stock exchange to shut down amid unsustainable heavy losses. The Taiwan Stock Exchange justified designating TransAsia’s shares as a full delivery stock because the closure of a listed company was likely to have a materially adverse impact on shareholder equity and could impact the exchange's weighted index.
In the case of TransAsia, shares fell 7.14% on November 21, 2016, and trading of the stock was suspended for one day while investors waited for a decision on the company’s fate. After TransAsia announced, it would immediately cease operations and dissolve the shares were placed into full delivery share category when trading resumed the next day. As a full delivery stock, TransAsia shares continued to plunge by the maximum daily decline of 10%. After suffering further losses, TransAsia was delisted from the market after it held a special meeting for shareholders on January 11, 2017.