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04/03/19
19:59
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Originally posted by DeligentINv
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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.
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Which means the only people selling at the moment are doing so at a considerable loss AND passing up the opportunity to buy discounted shares at 20c. Go figure.