abc in afr today, page-5

To elaborate further,

A common misconception is that rights issues are bad when the share price is depressed because it causes a large overhang and the share price takes a long time to recover.

This is only bad if you're a trader playing the shareprice!

If you're long term, value oriented investors -- and value investing is what Lazard claims it does, while Temasek is a long term investor -- it has no effect on the value of your investment at all!

So the rights issue is struck at a low price. You're selling out cheaply. But to whom? Yourselves. If it goes pear shaped you bear additional losses, but if it goes well you keep all the gains. You don't lose out at all.

Put simply, if you're a fundamentals investor you can ignore the market prices and quotation, etc. A rights issue is simply a way for the owner of the company to inject cash directly into the company. If you fully owned a company worth $100m and you wanted to put $10m of your own money into it, you're down 10m personally but your 100% owned asset is now worth $110m. It evens out. It doesn't matter at what quotational value the $10m you put into the company is struck at, the value of the company will still be 100m before the rights issue, 110m after. Your amount of ownership of the company is still the same. Number of shares, quotational price, etc are all irrelevant to the fundamentals investor.