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How the right issues related the share price

hi jerry,
 

  if u were holding the old stock before the rights issue was announced cant see how u can lose out
if u get the rights. since u will own the old stock + rights.

usually what happens is when the rights issue is announced and it is a good company (atleast above 30 - 40 cents counter) , the share price goes up coz more people buy it for for the rights.
then after the ex-rights date, the price will come down back which is  based on formula

the formula used would be   (price before announcement * 1 lot ) + (rights price * right lot ) / total lots. 
eg LKH was trading at 2.10 or so and it announced 2 rights for 1 share at 37 cents.
the price went up all the way to 2.6 and after ex-rights price became 87 cents.

(2.1 * 1) + (2 * 0.37) / 3 = 0.87 .

after a period of 1 or 2 months or so, once most of the short term players have sold their rights shares, the price slowly heads back to original price provided companys profit is going to increase to maintain earning per share.

 

 

hi,

thanks for your explaination . i believe if the comp issuing new shares, it will cause the price going down soon right ? isn't it unfair to the shareholder who has been holding the old shares but the the share value has been diluted after new share issuing ?

thanks . 

 

hi ,

  im no guru but i am vested in a few rights shares.
  the reason why the share price will go down ex-rights is because Due to more no of shares
  the Earning per share has to go down. After all company is still making same profit before
  and after the Rights issue.since Earning per share has to go down, market will automatically
   adjust the Price per earning to match what it was before the Rights issue announced.

hope this helps.

 

ya ... i believe yes .. right is something like warrant , normally the price is discounted comparing to the current share price, thus share value should be diluted because it will more shares in the market. but what i dont understand is, will this cause the share down ?

can some guru help on this. thank you very much !

 

Hi,

I'm a little unclear about this. In singapore, can we sell our rights away?
 

 

hello,

can anyone explain to me how the right issues will affect share price. will share price go up or down ? and why ?

below some reference.

http://www.investopedia.com/articles/stocks/05/062905.asp

thanks in advance.