Executive Summary
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A rights issue is a method by which a listed company can issue new shares. The principle of a rights issue is that stockholders are offered new shares in proportion to their existing holdings. If stockholders do not want to buy the new shares, they can sell their rights on the stock market.
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The main alternative issue methods are the firm-commitment offer, the private placement or placing, and the open offer. These methods have been replacing rights issues in several countries.
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The average reaction of a company’s share price to firm commitments is negative, but it is positive for placements and open offers. The reaction to rights issues varies by country.
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The aim for a company is to have a smooth issue that raises the intended amount of capital for a competitive fee and at a minimum discount.
Introduction
This article is about issues of shares to investors by companies that are already listed on a stock exchange. Such issues are often called rights issues, although in fact the rights issue is only one of several issue methods used. Other methods will also be discussed here. A generic term for issues by listed companies is seasoned equity offers (SEOs).
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