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June 2011 question 3 b (i)

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FM Exams › June 2011 question 3 b (i)

  • This topic has 1 reply, 2 voices, and was last updated 9 years ago by John Moffat.
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  • December 4, 2015 at 5:30 am #287399
    farhana001
    Member
    • Topics: 34
    • Replies: 45
    • ☆☆

    Can you please explain me the second paragraph of this part.

    December 4, 2015 at 8:28 am #287435
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54656
    • ☆☆☆☆☆

    If they have a rights issue, then the new shares go to the existing shareholders and therefore the existing shareholders still control the company because the have a vote at shareholders meetings.

    If they have a new issue it means that lots of new shareholders will appear – they will have a vote as well, and there is a risk that the existing shareholders might end up being out-voted. (OK they still have a majority of the votes, but not a big majority.)

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