Sep 3 (Lagos) - Rights Issue happens when a Company offers its existing shareholders to buy additional units of shares based on current holding in proportion to shares outstanding. It is means to raise more capital by a Company.
Dividend payout happens when a Company shares its profits with its shareholders in equal proportion per unit of share.
If a Company has so much excess capital that it can declare a dividend, then why would they do a rights issue almost simultaneously.
Investors should see such signals to understand a Company, its corporate governance, dividend payout Policy before buying its shares. Rights issue usually lead to depression in stock price because it increases the shares outstanding. Earnings per share often takes a hit.
How do you feel about Companies that do rights issue and pay a dividend in a period of 6 months.
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