Is rights issue good or bad?

A rights issue can be good or bad depending on the company’s purpose and financial health.
If the company raises funds for growth and communicates clearly with shareholders, it’s usually a good sign. But if it’s done to cover losses or repay old debts, it might not benefit investors.

Advantages of a Rights Issue

• Buy at a discount: Opportunity to purchase additional shares below market price.
• Increase stake: Allows investors to maintain or increase ownership in the company.
• Profit from renunciation: Investors can sell their rights entitlement in the market if they don’t wish to subscribe.

Disadvantages of a Rights Issue

• Dilution risk: Ownership may reduce if you don’t participate.
• Potential drop in share value: Market price may fall after the issue.
• Earnings impact: EPS may decrease due to more shares being issued.