What is a rights issue?

Rights issue is a form of stock issuance, which gives existing shareholders the right to choose new shares first. This way can protect the legal preemptive right of existing shareholders. For example, if an enterprise has issued 654.38 billion shares and wants to issue 20 million new shares, it must distribute shares to existing shareholders according to the ratio of 6543.8+ 0: 5 (20 million: 654.38+0 billion).

Each shareholder has the right to purchase new shares at the ratio of 1 share for every 5 shares held by him. Rights issue is usually carried out by underwriting, so that underwriters will buy new shares that existing shareholders have not bought at a certain price.

Shareholders can also vote to waive the preemptive right and allow enterprises to issue new shares to new shareholders. For example, this voting is necessary when issuing new shares to acquire subsidiaries or establishing management stock option plans.

Extended data:

Example: At present, the market price of a company's stock is $3 per share, and it is announced that it will issue additional shares at the ratio of 3: 1 (every 3 shares 1), and the price of new shares is $2.48 per share.

analyse

Theoretically, ex-dividend price is the average price, and the calculation method is as follows:

3 old shares, each worth $3, * * * $9.00;

1 new shares, valued at $2.48, * * * $2.48;

The theoretical value of 4 shares is 1 1.48 USD;

Theoretical ex-dividend price: 2.87 USD (1 1.48 USD ÷4).

The IPO price is 2.48 USD, that is, the theoretical ex-dividend price is discounted by 0.39 USD, that is, 13.6%.

When choosing the discount range, the discount should not be too small, because the stock price will fall after the announcement of the rights issue; At the same time, the discount should not be too large, otherwise the distribution price is too low, and investors will pay attention to the financial health of the enterprise.

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