[Jenn]

After a rights issue, the share price would fall. But I read that there would be no effect on shareholder wealth. Why is that so? If the share price drop, doesn’t it mean that the capital gain decreases too?

[Jenn]

Because when I read from the study text, it says that if the shareholders does nothing, the company will well the rights to new subscribers for the benefit of the shareholders. That’s why I’m a bit confused about that.

Why would a shareholder want to sell out all his stocks and buy it back later at the ex rights price? Will the shareholder benefit by doing that?

[Author]

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