Help CenterFor Woxa, our platform does not provide rights issue services. But we would like to present information about the Rights Issue in order to share knowledge about Corporate Actions.
How does the Rights Issue work?
When a company faces financial challenges and needs to raise additional capital, it may choose to carry out a rights issue by granting rights to its existing shareholders.
For example, You own 100 shares of AAC company at a price of $7 each. Later, the company needs to raise an additional $50 million by issuing 10 million new shares at $5 per share, which existing shareholders can purchase. The ratio to your number of shares is 5 to 10, meaning you can buy 5 new shares for every 10 shares you originally held.
- Shareholder's Value (before rights issue) = 100 shares x $7 = $700.
- The number of right shares to be received = (100 x 5/10) = 50
- Price paid to buy rights shares = 50 shares x $5 = $ 250
- Total number of shares after exercising rights issue = 100 + 50 = 150
- Total value after exercising rights issue = $ 700 + $250 = $950
- The price per share post-rights issue = $700 / 150 = $4.66
Therefore, if you hold 100 shares, you will be entitled to purchase 50 new shares at a price of $250.