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Get Started in Shares by Glen Arnold

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Nonsense spoken about the discounted price

When journalists talk glibly of a rights offer being ‘very attractively priced for shareholders’ they are generally talking nonsense. Whatever the size of the discount the same value will be removed from the old shares to leave the shareholder no worse or better off. Logically, value cannot be handed over to the shareholders from the size of the discount decision.

Shareholders own all the company’s shares before and after the rights issue – they can’t hand value to themselves without also taking value from themselves. Of course, if the prospects for the company’s profits rise because it can now make brilliant capital expenditures, which lead to dominant market positions, then the value of shares will ...

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