A rights issue provides a way of raising new share capital by means of an offer to existing shareholders, inviting them to subscribe cash for new shares in proportion to their existing holdings.
For example, a rights issue on a one-for-four basis at USD.10 per share would mean that a company is inviting its existing shareholders to subscribe for one new share for every four shares they hold, at a price of USD.10 per new share.
A company making a rights issue must set a price which is low enough to secure the acceptance of shareholders, who are being asked to provide extra funds, but not too low, so as to avoid excessive dilution of the earnings per share
No comments:
Post a Comment