NBG- This makes no sense...

R

Rearden Metal

With all my years of experience, once in a while there are situations I'm simply unable to understand. Here are the facts:

NBG current share price: $1.41, with a 1 for 10 reverse split upcoming.
NBG options: DO NOT have a bearish skew.
NBG upcoming offering: 2.27 billion new shares to be offered at $5.50/share (Post reverse split. That's the equivalent of them floating new shares at $0.55 with NBG currently trading at $1.41).

So the obvious question: How is this not free money? Why not short synthetic stock at $1.41 (buy puts and sell calls), and then offset that position by subscribing to the new offering and picking up shares at $0.55? I get that the offering could be over-subscribed and you may not get the full amount of shares requested- but still. The discrepancy between the current share price and the price of buying into new shares about to be floated is so wide, it makes no sense. the market simply doesn't pass out free money like that, so I must be missing something... but what?
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http://www.reuters.com/article/2013...feedType=RSS&feedName=financialsSector&rpc=43

Greece's National Bank sets rights issue price after reverse split

ATHENS | Mon May 20, 2013 10:49am EDT

May 20 (Reuters) - Greece's biggest lender National Bank said on Monday it would sell 2.27 billion new shares at a price of 4.29 euros ($5.50) each, as part of its recapitalisation plan.

The price is calculated after a 1-for-10 reverse stock split.
 
From the way this is worded, it looks like NBG is selling rights, not just outright issuing shares. The difference in value would be priced into the right.
 
So you buy a right at $5.50 (=$0.55 pre-reverse split equivalent), and what do you get exactly? Is it like the same thing as a warrant or a call option?
 
OK, I get it now.

From investopedia:

Definition of 'Rights'
A security giving stockholders entitlement to purchase new shares issued by the corporation at a predetermined price (normally at a discount to the current market price) <b>in proportion to the number of shares already owned.</b> Rights are issued only for a short period of time, after which they expire.

Also known as "subscription rights" or "share purchase rights."

Investopedia explains 'Rights'
Rights can and do trade independently of the underlying stock on an exchange. Similar to options, the price of a right is determined by a number of factors, such as its subscription price, the underlying stock price, its volatility, interest rates and time to expiration. The intrinsic or theoretical value of a right during the cum rights period - when the stock trades with the rights attached - is different from the value of a right during the ex-rights period, when it trades independently.
 
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