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#1
18th October 2004, 07:17 PM
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Rights Issue
Hello,
I am hearing this word "Rights issue " in the news or someforums etc . I got the meaning for it as The issue in which allotment is only made to existing shre holders . What will be the effect of Rights issue On a stocks current price .For example Bata board approves for right issue but the details will be declared later . Now what will be the effect on Bata stock price with this rights issue ? Regards Naresh Cherukuri 
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#2
19th October 2004, 08:00 AM
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Re: Rights Issue
Companies have rights issues when they want to raise more money on the stock market. Rather than take on corporate borrowings, they offer to sell new shares at a stated price, usually below their current share price to make them attractive.
Typically, a rights issue is expressed as 'one for nine' or 'one for six'. What this means is for every nine (or six) shares you already own, the company will offer you one more at the special price. You can sell the rights (or even allow them to lapse) rather than take them up, but if you don't take them up your shareholding in the company will be diluted (because new shares are being issued). Essentially, with a rights issue, shareholders are being given first refusal to buy shares as compensation for the fact that the value of their existing shares is going to go down. Around the time of a rights issue, the company's shares are described as 'cum-rights' or 'ex-rights'. Cum-rights means that anyone who buys shares in the company will be entitled to subscribe for the new shares; but on and after the date of the new issue, shares become ex-rights, and the right to subscribe to the new shares stays with the seller.
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