As from April 2013 my Journey in Investing is to create Retirement Income for Life till 85 years old in 2041 for two persons over market cycles of Bull and Bear.

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This blog is authored by an old multi-bagger blue chips stock picker uncle from HDB heartland!

"The market is not your mother. It consists of tough men and women who look for ways to take money away from you instead of pouring milk into your mouth." - Dr. Alexander Elder

"For the things we have to learn before we can do them, we learn by doing them." - Aristotle

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Tuesday, 9 November 2010

Right issue back again (5)

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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