Whats a Rights Issue? in relation to Banks

[kev53]

I hear a lot of rumour and talk in papers about the possability of banks coming out with a "Rights issue" to shareholders. My question is simple, What does this mean??? Will shareholders be forced to hand over more funds under a "Rights issue"??

 

[smiley]

Re: Rights issue - Banks

thats all that it is pure speculation.

if any company has a rights issue it is to raise extra capital either for expansion or to increase the equity on their balance sheet.

you would be offered to buy shares at a reduced price. It will dilute eps but in the long run its far from the 'end of the world is nigh' perception that the media are talking about.

 

[Brendan Burgess]

Under a Rights issue, you have a right to buy new shares. You are not obliged to.

Your rights will have value, so they can be sold on the open market.

Brendan

 

[kev53]

Thanks guys

 

[smiley]

yes thats correct. You have the option to sell your rights also, which is a form of compo for the share dilution which the rights issue will lead to.