24 May 2021
I am unclear how Rights Issue work. Can someone please help advise:
Truly appreciate if anyone can help guide me on this please. Thank you.
Details of the rights issue:
If you did not subscribe to the rights issue, you should only have 3000 shares. The impact to your holdings is that essentially, your holdings are diluted. What does this mean?
Well, imagine the Sembcorp Marine is a pie and you own a really small portion of it (with your shares). However, due to the rights issue, the same pie is now split among more people.
By right, the rights issue is supposed to help existing shareholders by allowing them to acquire a proportionate number of shares to their existing holding. This would allow them to own the same percentage of the pie after the rights issue.
However, since you missed the rights issue, for every 1 share out there, another 4 shares were released, meaning that because there are 5x more shares in the market vying for the same pie, your share in the pie has decreased, even though you still hold 3000 shares.
So usually, the impact of such a rights issue will cause share price to fall to somewhere between the price before the rights issue and the rights issue price. As such, you may have incurred a loss to your total investment value in Sembcorp Marine.
Hope this is clear!
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