Rights issue

RECENT NEWS
Clusterstock  Jun 26  Comment 
A dispute over hiring in Asia between UBS and Deutsche Bank resulted in UBS being left out of a rights issue from Deutsche Bank earlier in 2017,  according to a story from the Financial Times. Tensions developed after UBS hired Deutsche Bank's...
guardian.co.uk  Jun 7  Comment 
Royal Bank of Scotland’s abrasive tone, and its seemingly freewheeling approach to racking up legal fees, have felt wrong Now we know: Royal Bank of Scotland’s rights issue in 2008 wasn’t a £12bn cash call, it was a £13bn affair. The...
Reuters  Jun 7  Comment 
A London High Court judge on Wednesday called off a trial due to begin on Wednesday in a drawn-out investor lawsuit against Royal Bank of Scotland over its 2008 rights issue that would have called disgraced former CEO Fred Goodwin to testify.
The Hindu Business Line  May 29  Comment 
The board of Prakash Constrowell will meet on Tuesday to consider audited standalone and consolidated financial results for the quarter and year ended March 31, 2017. The board will also consider fur...
The Hindu Business Line  May 29  Comment 
State—owned Syndicate Bank today said it plans to raise up to Rs 3,500 crore in the current fiscal through instruments such as a rights issue. The bank had posted Rs 104 crore profit for the March...
Clusterstock  May 22  Comment 
The Royal Bank of Scotland has reportedly doubled a settlement offer to thousands of shareholders that are suing the bank and former RBS executives after they invested in the bank before its 2008 rights issue and subsequently lost lots of...
Motley Fool  May 19  Comment 
That's the logical consequence of offering shares at a considerable discount to current pricing.
The Economic Times  May 11  Comment 
UBI to raise equity from institutions placements, public issue and rights issue.




RELATED WIKI ARTICLES

Related Articles

 
TOP CONTRIBUTORS

Rights Issue

Rights Issue is a secondary capital raising strategy by the company. It gives it's stockholders an option say 1:1 (i.e. one rights issued per stock held) for the outstanding common stocks.

Ex. Say an investor has 100 shares of a company at Rs. 10 per share with a total investment of Rs. 1000. The company's brokers informs him about the option as 1:1rights issued at Rs. 8 per share. The investor exercises the option and now get's 100 shares @ Rs. 8 each. Thus his total investment is now 8*100 + 1000 = Rs. 1800 with 100+100 = 200 shares. Average price of share = 1800/200 = Rs. 9.

If all the investors avail the option than the market price of the share would come down to Rs. 9 per share and the market cap of company for a total initial outstanding common shares of 1 million (now 2 million) would be Rs. 18 million from previous market cap of Rs. 10 million.

The EPS of the company halves if the capital raised is not used as the number of shares has doubled. If the capital raised is reinvested properly and the EBIT increases than the EPS also changes accordingly.

Investor use

As used by the investor, these are an offering of shares issued at a special price by a company to its existing shareholders in proportion to their holding of old shares. [1]

Investors in common stock occasionally receive rights offerings to purchase additional common stock below the existing market price. The stock rights were probably issued to satisfy the investor’s preemptive right to maintain an existing level of ownership in the company. Rights are issued below the existing market price to encourage the exercise of the rights. The rights are separate having their own markets. [2]

From "morally correct," "just, good, fair, proper, fitting, straight," to put right" "just, righteous, wise "honest, morally upright "just claim" "in a proper manner" [1]

References

  1. ‪Wall Street words: an A to Z guide to investment terms for today's investor‬ By David Logan Scott pg318
  2. Wiley CPA Exam Review 2010: Financial Accounting and Reporting by Patrick R. Delaney and O. Ray Whittington ISBN-10: 0470453516 pg585
Wikinvest © 2006, 2007, 2008, 2009, 2010, 2011, 2012. Use of this site is subject to express Terms of Service, Privacy Policy, and Disclaimer. By continuing past this page, you agree to abide by these terms. Any information provided by Wikinvest, including but not limited to company data, competitors, business analysis, market share, sales revenues and other operating metrics, earnings call analysis, conference call transcripts, industry information, or price targets should not be construed as research, trading tips or recommendations, or investment advice and is provided with no warrants as to its accuracy. Stock market data, including US and International equity symbols, stock quotes, share prices, earnings ratios, and other fundamental data is provided by data partners. Stock market quotes delayed at least 15 minutes for NASDAQ, 20 mins for NYSE and AMEX. Market data by Xignite. See data providers for more details. Company names, products, services and branding cited herein may be trademarks or registered trademarks of their respective owners. The use of trademarks or service marks of another is not a representation that the other is affiliated with, sponsors, is sponsored by, endorses, or is endorsed by Wikinvest.
Powered by MediaWiki