Comments on: More on Dilution

By: createwealth8888

createwealth8888 — Sat, 16 Jan 2010 05:57:55 +0000

If a company issue rights, you either subscribe the rights to stay in the game or simply get out.

By: 8percentpa

8percentpa — Fri, 15 Jan 2010 15:35:25 +0000

Sorry typo – should read

However, if you do NOT believe in this value investing crap…

By: 8percentpa

8percentpa — Fri, 15 Jan 2010 15:34:08 +0000

There are businesses and companies that are so cash generative that the balance sheet is always overflowing with cash. Whatever expansion that is needed can always be funded with internal cashflow.

These are companies that value investors look for.

However, if you do believe in this value investing crap, you can always buy some companies knowing they are gonna do a rights issue, and you get to buy more at a discount to currently already low share prices. And shortly after ex-rights, just sell the shares for some arbitrage profit. It is a good way to make money.

By: AK71

AK71 — Fri, 15 Jan 2010 11:41:46 +0000

An important question to ask is the reason for the rights issue. If the company is undergoing expansion and the fundamentals and prospects are good, it might be better to go to the shareholders and ask for money rather than to borrow from the banks. That means a lower gearing level and less interest expense. The company does better in time and the market recognises this in the usual way.

We should look at an issue from all angles and avoid tunnel vision.

By: createwealth8888

createwealth8888 — Fri, 15 Jan 2010 11:26:08 +0000

Right issue is suck only if you have no money to stay in the game to prevent dilution. You get diluted. You became a sucker; otherwise, you just continue the game with a higher investment cost and higher risk exposure.

Ask those people who sold their right issue too early for DBS, CPL, KepLand and more.