Non-Renounceable Rights Issue

Submitted by Share Trading on 2 August, 2012 - 19:14

A non-renounceable rights issue is when a company offers its shareholders the right to purchase more of the company's stock, usually at a discount to market rate. Compared to renounceable rights, the offer is not transferable to other parties and cannot be bought or sold. Issuing more shares of a stock dilutes the value of current outstanding stock on the market.

A rights issue allows existing shareholders to buy newly issued stock at a discount, compensating them for the impending stock dilution. If shareholders choose not to exercise their right by buying into the discounted shares issue, they will suffer dilution of existing stock holdings and lose money.

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