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Why are rights issues usually made at a discount?
From the perspective of the business, how critical is the pricing of a rights issue likely to be?
From the viewpoint of the business, how critical the pricing of a rights issue is likely to be.In order to encourage shareholders to buy the new shares.
If they are not offered at a price lower than the current price on the stock exchange then people might as well just buy existing shares on the stock exchange if they want them.
The pricing of the issue is critical because the business wants to be able to sell all of the new shares and at the same time wants to raise as much money as possible.
All that is needed for the exam on rights issues is explained in my free lectures. The lectures are a complete free course for Paper F9 and cover everything needed to be able to pass the exam well.
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