How right issue affect the share price ?
What is the right
issue?
The right issue is an issue through which a company raise
additional capital from its existing shareholder to fulfill its current
obligation # more link attached
How Right issue affect the share price?
Generally , when the company takes its right issue than the
share price of that company starts racing because the company takes the rights
issue less than the market price
The price of Wipro limited is trading at 500 in the market,
if the company takes its rights issue, then it takes it less than the market
price, in this example, the market price is Rs 500
By bringing the rights issue at less than the market price,
people starts buying in the stock, which increases the demand in that share.
#Demand increase price also increase in stock market
Because the investor whose shares of that company will remain till the recodes date, the investor will get shares at a price less than the market price.
Why price fall after right declared?
We have seen in the above chart that after the right is declared, the share price decline.
We have understand this with an example
A company offers new 10000 share of $10 each with 50$
premium to existing shareholders on one for one basis.(1:1)
Price falling
Reasons behind then after right issued declared
Above we saw that before the announcement of right issue
, the share was coming at $ 70 but the same $65 started coming after the issue
of right .