OLTB wrote:Well, my question was going to lead onto whether most people take up these scrip issues, or if they leave alone. I am aware that not taking up the issue will lead to dilution of shareholding but as DE says, you'd be taking up the rights on an assumption (and the Board's prayers being answered) that the price will go up... Maybe better places to invest my cash. Cheers, OLTB.
I'll tell you my experience and understanding of rights issues [FWIW!].
They're usually a single event, to raise cash for a strategic corporate goal [a global expansion, a big take-over etc]. I haven't seen this multi-stage, multi-year proposition before.
They're at a discount to the value of the instrument. Why would you volunteer to pay a premium? [note: That's for stocks, I appreciate this is a derivative that trades at a discount/premium to NaV.]
They quite often occur when the Board have got big/grand plans for some project and need funding. That's your roll of the dice, IME such grand plans are often not great, even if they make it appear as quite compelling. Ie [IMO] you need to be being offered a persuasive discount to even consider it.
Exercising rights imagines that taking them up/growing our holding, suits your goals, but for many the funds might be better invested elsewhere.
I've had 3-4 rights offers in the last say 10-15 years, but I hold a concentrated portfolio. For the first I took it up, it didn't work out well. For the others, per the above reasons, I sold the rights and used the cash for things I preferred to invest in. Trouble is here, your suggested rights to buy at a premium should [theoretically] have no value.