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A rights issue is an offer to existing shareholders to buy new shares in proportion to their existing shareholdings…
Is there a normal share issue to existing shareholders which are NOT in proportion to what they already own? Does this exist?
Or would existing shareholders just buy shares through a public issue if it was advertised?Existing shareholders can certainly apply for as many shares as they want under a public issue.
It is only a rights issue where they are offered them in proportion to their existing shareholdings.
The reason is that rights issues are normally offered at a discount to the current share price, whereas new public issues are not.I assume a rights issue is chosen due to not having to pay for the advertising of public shares (I am guessing that they have to pay a fee here..), and they can have existing shareholders buy more shares in the company rather than trying to find new shareholders…[less hassle]
But if it is cheaper and quicker… can companies offer shares to existing shareholders at a discount (or no discount), but not in proportion to what they currently hold? Or is it just easier for them to have a public issue?
For a small company, a public issue is not feasible. However the can sell new shares to whoever they want provided they have the approval of the other shareholders.
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