Would a Rights Issue Increase Share Value?
Would a Rights Issue Increase Share Value?
In the short term, a rights issue is where a business will issue more shares for more capital. This will reduce the share value as now there are more shares in cirulation.
Current investors may be given a chance to buy more shares in some form of ratio, for example, for every share you current own you can have the chance to buy 12 new ones.
However it dilutes your current share holding unless you buy the full amount that you can.
In the long-run the business will have more capital to pay off debts and invest… therefore increasing the share value.
