(10) Prevent Disturbances In A Well-Balanced Stock Portfolio
It is one of the most popular reasons why small investors don’t subscribe rights issue. Every investor prefers to invest in a given stock as per his/her own risk taking capabilities. It is something necessary to build an ideal stock portfolio as per individual needs.
For example, if a person is already invested in a risky stock up to his/her maximum possible limit then perhaps he/she will refrain from investing more funds in a risky stock.
Therefore, if a company belonging to risky group of an investor portfolio brings a rights issue then such investor will prefer not to subscribe a given issue.
It is due to the fact that subscribing in a given issue will increase his/her investment in risky stocks. This will ultimately damage the balance of a well build stock portfolio to some extent.
Thus, investors prefer to ignore rights issue even when his/her stake will be diluted in the company after rights issue.
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- Reasons Why Small Investors Stay Away From Rights Issue: Shutterstock