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Rights offer


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#1 Pdiddy

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Posted 18 April 2018 - 10:17 AM

Sorry for the stupid questions but I always thought that a stock is only devalued when a stock split occurs which makes sense.
But when I read the below article it's got me confused a bit:
"More isn't always better
While issuing new shares of stock may seem like a good idea in theory, it can sometimes have a negative impact on shareholders. When a company issues additional shares, it can cause its existing shares to become diluted. If the total number of shares outstanding increases, each existing stockholder's individual ownership share of the company will become smaller, thus making each share of stock worth less."
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#2 Pdiddy

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Posted 18 April 2018 - 10:01 AM

"Construction company Basil Read proposes to raise R300m via a steeply discounted rights offer that will see its shares in issue increase 11 times.

It is pricing the rights offer at 22c per share — a third of Friday’s 65c closing price — and offering shareholders 10.35 new shares for every share held."
So am I right in saying because more shares have been issued in to the market the shares are devalued , i.e. If it was 65c before and the shares in issue increases 10 fold it's actually worth 6,5c
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#3 Polly

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Posted 18 April 2018 - 09:46 AM

so if you owned 100 shares at .65 c before rights offer.....cost = R65.00 right offer shares 1000 shares at 22c = R220.00 total shares = 1100 cost = R285 per share = 26c trading today 21c you worse off by 5c per share
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#4 Pdiddy

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Posted 18 April 2018 - 09:26 AM

22c
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#5 Polly

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Posted 18 April 2018 - 08:59 AM

at what price was the rights offer?


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#6 Pdiddy

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Posted 18 April 2018 - 08:46 AM

Regarding rights offers for example Basil read issued more shares into the market, the share price was 65c then you get 10 shares for every share you own, since then the price dropped to 21c , does this mean that you'll still have made good returns because 10 shares today is worth 220c where as one share was 65c in Feb
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