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John Moffat.
John Moffat.-
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ilham9089
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Hello sir, I’m having difficulty understanding the value of a rights issue per existing share and per new share? The rights are offered to the shareholders per existing share so I really don’t understand.
John Moffat
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I assume that you have watched my free lectures on rights issues and so you are happy calculating the value of rights.
Rights are not offered per each existing share. A rights issue might (for example) be 1 for 4 in which case they have the right to buy 1 new share for every 4 existing shares.
If they do not want to take up the rights (i.e. to buy the new share) then they can sell the rights issue and the amount they can sell it for is the value of the right.
If the question asked for the value of the rights per existing share, then since in my example they needed 4 existing share to get the right for 1 more share, then the value of the rights per existing share is the value of the right divided by 4.
Please do watch my free lecture again, because I do explain all of this in the lecture.
ilham9089
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