(4) Creating An Opportunity For New Investors To Exercise Rights To Purchase Shares
It is one of the most typical reasons to buy rights shares at a price higher than open market. Rights issue is a form of invitation to all existing shareholders as per record date to buy additional new shares at issue price.
Shareholders can either exercise their rights to buy more shares or sell their rights to other investors. When someone declines to exercise their rights to buy new additional shares then it creates an opportunity for others.
New investors can utilize this small opportunity to exercise rights to buy additional shares of an attractive company. This step can sometimes replace weak shareholders with strong shareholders.
Finally, the stock is now in the strong hands to start a new upward journey in the stock markets.
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- Subscribe Rights Issue At Higher Than Market Price: Shutterstock