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Answer Posted / reenaa kapoor
This is the offer of new shares by a company to the
existing shareholder.such rights are valuable to
shareholders as the are at a price below the current market
price.this right issue is a inexpensive & convient way of
raising editional capital.A right issue to the existing
shareholder is a mandatry requirement.
clearly the issue of additional shares to other
parties without giving the existing shareholders the
opportunity to subscribe would reduce the existing
shareholder.proportion of the total capital,i.e.it
would 'water'their equity.Therefore the stock exchange does
not allow a listed company to issue new shares without
giving pre-emptive rights to the existing shareholders.
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