Chapter 16. Rights Issues and Placings
If we should be suspicious of buybacks, we should be horrified at rights issues, where companies offer existing shareholders the right to buy more shares.
This is bad news because:
- We want the company to be handing money to us, not the other way round.
- We may not have spare cash at that particular moment.
- If we wanted to buy more shares in the company we would have done so on the stock market, deciding for ourselves how many to buy.
- The share price will almost always fall, making it less attractive to sell out and invest elsewhere.
- The company may have to pay underwriters to subscribe for any shares that are not taken up by the existing shareholders.
- The company will certainly have to pay ...