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Get Started in Shares by Glen Arnold

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Other equity issues

Some companies argue that the lengthy procedures and expense associated with rights issues (e.g. the time and trouble it takes to get a prospectus prepared and approved by the UKLA) frustrate directors’ efforts to take advantage of opportunities in a timely fashion. Firms in the USA and some other countries have much more freedom to bypass pre-emption rights. They are able to sell blocks of shares to securities houses for distribution elsewhere in the market. This is fast and has low transaction costs.

If this were permitted in the UK there would be a concern for existing shareholders: they could experience a dilution of their voting power and/or the share could be sold at such a low price that a portion of the firm is handed ...

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