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Hi Mr John ,
The term ” a right issue is an issue of shares for cash , the right to buy the shares are initially offered to existing shareholders , if existing shareholders do not take up their right to buy the shares , then shareholding will be diluted ”
Can you please explain about ” shareholding will be diluted ” ? why is it ” diluted ” ? Regards
If a shareholder currently owns 10% of the total number of shares and they take up their rights, then they will still own 10% of the total number of the shares.
However, if they do not take up their rights then the new shares will be bought by other people and they will therefore only have their existing shares and it will be less than 10% of the total number of shares.
That is what is meant by their shareholding being diluted.
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