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Rights Issues

A rights issue takes place when a company wants to raise funds from existing shareholders. Unlike dividends, it is not a regular occurrence, but you should be ready for it if it comes. The rights issue gives you as an existing shareholder the right to buy new shares at slightly less than the current value of your existing shares, and without paying a broker’s commission.

In a 1 for 2 rights issue, for example, you have the right to buy one new share for every two that you already hold. Alternatively, you can sell your rights in the market, or let them lapse and later receive a cheque from the company for the cash received. Following completion of the rights issue, the share price will even out at slightly below that of your original shares.

Your online broker will inform you of any rights issue for which you are eligible, and you can register any interest by e-mail. But first find out why the company wants the funding. If it is for unwise expansion or another wrong reason, steer clear. Should directors not take up a rights issue, it is often wise to follow their example.

Investment Opportunities
  Investment Opportunities


Investment Opportunities
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