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Get Started in Shares by Glen Arnold

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Rights issues

A rights issue is an invitation to existing shareholders to purchase additional shares in the company. This is a very popular method of raising new funds, and if you hold a portfolio of any size you’ll find that you are regularly being asked to stump up more cash for one company or another.

To do a rights issue the directors are usually not required to seek the prior consent of shareholders, and the LSE will only intervene in larger issues (to adjust the timing so that the market does not suffer from too many issues in one period), so it is seen as a relatively straightforward way of raising fresh equity capital.

To inform you properly about the issue of more shares, and entice you to buy some, the company will send you a prospectus. ...

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