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Get Started in Shares by Glen Arnold

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Illustration of a rights issue

Imagine you own shares in Topup plc. It has 200 million shares in issue. It wants to raise £100m for expansion but does not want to borrow it. Given that its existing shares are quoted on the stock market at 240p, the new rights shares will have to be issued at a lower price to appeal to shareholders because there is a risk of the market share price falling in the period between the announcement and the purchasing of new shares. The problem is that when you get the prospectus and the offer from the company to buy more shares you have at least two weeks (10 working days) to respond. The company sets the price before it sends the prospectus out and there is a risk for you that the market price will move downward below ...

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