5 Important Things About Rights Issues in the Capital Market
5 Important Things About Rights Issues in the Capital Market

5 Important Things About Rights Issues in the Capital Market


Forex.spektekno.com – Investors or shareholders are the owners of the company, so investors may have certain rights, and one of them is the issue of the rights to legal action. Right in the capital market, it is the right acquired by the shareholders to buy new shares in the period and the price set by the company.

1. The Reason Companies Make The Problem Right

Basically, the reason the company made the issue of rights is to raise funds as additional capital again. Usually the company with the issue of rights is still in the stage of high growth and the fresh funds will be used for business expansion, repay the loan, or for working capital. If the issue of rights is made for the purpose of business expansion, then the actions of the company from the company can be viewed positively.

Some companies do issue rights with the aim to increase the share of ownership of the voting shares or increase the number of outstanding shares so that the stock becomes more liquid. In addition, the company can also issue a right to a capital markets company becomes greater. The rights issue this actually is almost similar with the stock bulbs, but the difference is a matter of rights it can add to the fund of the Investor at the same time can increase the profit of the enterprise market.

2. Benefits Of Problem Right

Given the goal of a company doing action rights is to raise additional funds, then the benefits to rights issues for the company is the company can use the funds as a source of capital, a new venture in Addition to the Loan from the bank. This can only happen when the economy weakens and makes the company difficult to borrow funds from the bank.

Meanwhile, the advantage of the issue of the Rights of shareholders investors is the implementation of the rights of new shares offered usually gets a discount because below the market price. The difference between the prices of sports and stock prices in the market sometimes quite significant and depends on how large companies that want to encourage the interest of investors to participate in the action korporasinyya.

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3. The Negative Side Of The Problem Right

The rights of Action of the company issued to the company in general is not favored by investors because it will give a negative impact on the ownership of stock investors. This happens due to rights issues would cause the stock of the experience of the publisher of elocution. The increase in the stock is a drop in the composition of the investor produces the addition of new stock.

Issuance of new shares will be detrimental to the investor if the investor does not do anything because of the percentage of stock ownership is reduced automatically. However, this negative impact can be overcome by carrying out pre-emptive rights, namely to make a purchase of new shares offered by the publisher.

Whereas if you do not have the funds to do the transaction of purchase of such shares, the shareholders can sell the rights to the new shares to other investors who are interested. The results of the sale of the rights to this possibility can be used to cover losses from the effects of the enlargement of the price of stock.

4. Things To Do Before rights watch

When the company decided to do the problem right, the number of shares of the company will increase. If the number of shares of the company that performs the issue of the right to improve and funds that go to the same company with the stock market, then it’s not going magnification so that the actions of the company to issue rights are not detrimental for shareholders. If You still confused to decide whether to use the pre-emptive right, You must do a few things here.

Do Evaluation Of The Implementation (Execution)

First, you need to consider the exercise price offered by the company whether it makes sense or expensive. To find out whether the price of the execution makes sense or not, You should do the valuation of the stock price.

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Please note that the stock prices of the implementation and the quality not the price of the stock is cheap, just because the stock price, which below market price. Therefore, do price value by calculating the total amount of the stock capitalization of the issuer and consider the ratio of per as well as the performance of the company.

Note The Possible Presence Of Side Effects Of Elocution

The second aspect that should be considered as stock investors before carrying out a pre-emptive right is a magnification effect that may occur. Therefore, we recommend that You observe the difference in the number of new shares issued by the amount of old stock. When the publisher makes the issue of the Right by the number of shares which is not far exceeds the number of old shares, then the company’s actions from the publisher deems reasonable.

For example, the issuer of A stock in the market as much as 2 billion. If the publisher of A rights issue of new shares not to exceed 2 billion, then it is still considered a reasonable. On the contrary, if the publisher of A rights issue which is conveyed into 4 or even 5 billion shares, should not be taken because of the side effects dilutasi that occur can exceed 50 percent.

Find Out About The Potential Buyer Of The Stock And The Problem Of Policy

The next step that needs to be taken before the rights of pre-emptif investigate anyone of prospective buyers of new shares. This should be done to avoid obscurity of prospective buyers standby and the absence of prospective buyers, so the new shares are sold to the public. This can be very negative impact on stock prices in the market.

In addition, find out also about the issue of the rights of the policy, if the action is implemented using a pre-emptive right or not. If the company does not offer rights to the investor, this will bring up speculation that the issue of the right will be used issuers not to the expansion of the business, but rather to pay the debts of the company.

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5. The Mechanism Of The Rights Issue Of Publishers

The mechanism of the Implementation of the issue of the rights of a publisher, usually beginning with the announcement of the company that is associated with the following important things:

Plan Use Of Funds

The announcement in this regard is very important to spread to the stock investors so that investors know the purpose of the issue of the rights of the publisher. The shareholders need to be alert when the plan to use the funds subject of the right is to pay off the debt. Usually companies are experiencing difficulties in the payment of his debts and cannot borrow money from financial institutions. These conditions could potentially cause the stock price to fall.

On the contrary, if the company will utilize the proceeds from the issue of rights for the expansion of business then the issuer, the rights issue will provide benefits for the shareholders, either in the form of dividends or stock price.

Information related to the ratio of the rights of pre-emptive

This information is very useful for the shareholders to determine the ratio of the number of old shares and the number of new shares. The data were then also used in the calculation of theoretical price of the stock price of the rights to this execution. By knowing the theoretical price, shareholders may perform the calculation of the capital to get new stock.

After the announcement of the publisher is concerned, the shareholders can take their rights and buy the stock. On the other hand, shareholders can also ignore the offer and chose not to execute him. However, in order not to lose money because the percentage of ownership share diluted, then the shareholders can also sell the new shares to the other party.

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