Is buying rights issue good or bad?
Rights offering or rights issue (RI) can produce advantage to the company by allowing them to raise capital. If a company is struggling financially, this kind of move could assist them to boost their balance sheet by eliminating debt or injecting new cash flow into the business.
Is it a good time to invest in Reliance?
Advising investors to buy and hold the counter for short-term to medium term; Ravi Singhal, Vice Chairman at GCL Securities said, “Reliance shares are highly bullish and it may go up to ₹2700 per stock mark in short-term. So, once should look at every dip as buying opportunity in the counter.
A rights issue gives existing shareholders the right to buy new shares in a company in proportion to the size of their existing shareholding. … The discounted price of the new shares means that after the new shares are paid for and start trading on the stock exchange the share price of the company will be lower.
Selling RE on the stock exchange is permitted until a few days before the issue closing date. “Shareholders not keen to subscribe to their rights can sell it easily to those who want to buy at the traded price on the stock exchange,” says Kkunal Parar, Senior Research Associate, Choice Broking.
Why is RIL going down?
One reason why RIL shares weakened after the AGM was due to disappointment among shareholders regarding the $15 billion Saudi Aramco deal. While Mukesh Ambani said the deal will be closed this year, some shareholders are unhappy that the deal has not been sealed yet.
Analysts say that the RIL valuations look attractive as compared to its peers and more investment and expansion in the business has been the major factors for the surge in the prices of the stock. … The stock had hit a 52-week low of Rs 1,830 apiece earlier this year, since then RIL stock has soared over 40 per cent.
What happens if I don’t take up a rights issue?
He warns: ‘If shareholders do not take up the rights issue, their stake in the company will be diluted. … ‘As shareholders can buy new shares at a discount to the market value, the rights have an intrinsic value and therefore can be traded in the market,’ says Hunter.
Does rights issue increase market cap?
A rights issue affects two important elements of a company equity capital and market capitalisation. … In theory, every new issue has some kind of diluting effect and hence as a result of a fall in the market price in proportion to an increase in the number of shares, the market capitalisation remains unaffected.
The shareholders not willing to subscribe to their rights issue can sell their rights in the open market through the rights entitlement trading platform of the stock exchange or via off-market transaction. This is known as the renunciation of rights shares.