The equity raising is pro-rata non-renounceable. LON has offered non-renounceable rights to shareholders to purchase more shares of the company (appears to be at a discount). A non-renounceable right is not transferable, and therefore cannot be bought or sold.
In non-renounceable offer shareholders cannot sell their entitlements on market. ‘Use them or lose them’ is the catch-cry. If you’re unable to take up your entitlement, or don’t have the cash available, you’ll end up being ‘diluted’
Non-Renounceable Rights Issuing more shares dilutes the value of outstanding stock. But because the rights issue allows the existing shareholders to buy the newly issued stock at a discount, they are compensated for the impending share dilution. The compensation the rights issue gives them is equivalent to the cost of share dilution so $0.20 is a discounted price. By offering non-renounceable rights, LON is setting a narrow window of opportunity for the shareholders to potentially purchase more stock at discount. So what could be the appropriate fair value of LON share price after non-renounceable rights issue.
LON Price at posting:
25.0¢ Sentiment: Hold Disclosure: Held
