Read? Right issue back again (4)
As retail investors it is much harder to think how our interests in the company can be diluted by not fully subscribing to rights issue.
Here is the story of BB and easier to see why?
BB has a 9% stake in Company A and was given a Board seat due to the 9% holding in the company.
One day, Company A does a 1 for 1 rights issue.
BB's Investment Manager thinking that he was smart. He sold the rights and made millions of dollars out of it.
He went to his boss to tell him the "Good" news.
Investment Manager: "Boss, we have made millions of dollars from selling those rights. So will I be expecting a special year-end bonus?"
Boss: "You idiot! We have just lost our Board seat as we now only have 4.5% stake."
Get it?
Anyone need more examples? let me know .. I can then think more about it.
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