Comments

  1. avatar says

    Dear John.
    I have just divided 1.5 to 7.5 and got right answer : 20 %. I also checked this way using different figures and answers were same again. I wonder whether I’m on right way or not. Thanks in advance :)

  2. avatar says

    Dear John,
    The rights issue wont make the the company’s share price to dilute( lower), since after offering rights the value of share falls? It will give loss to the shareholder, aside from theoretical assumptions.

    • Profile photo of John Moffat says

      The share price will be lower per share, but everyone will have more shares bought at a low price.
      In theory shareholders will make no gain no loss.

      In practice (as I say in the lecture) the share price will usually be higher than the theoretical share price, and shareholders will make a gain. The reason is that usually they will be expecting that the money raised will be invested well, which will increase the value.

      (If shareholders thought that they would make a loss, then nobody would take up the rights!)

Leave a Reply