rights issue announcement, page-107

Thanks retiredyoung.

That's the way I understand it too.

So even if I didn't want to participate in the rights issue it would make sense for me to sell some shares before the ex date (as long as they are above 5ct) and pick up the full amount of shares for 5ct, effectively increasing my shareholding.

Example:

Let's say i hold 200,000 shares at average 0.04.

Let's also say share price is at 6ct on Monday (last day to sell before ex date).

Then I would roughly sell 1/3rd of my holding (60,000 shares) at 6ct worth $3600.

I am then entitled to 70,000 shares via the rights issue. (one share for each two I am holding after the sale which is 140,000)

Those 70,000 shares @ 5ct will cost me $3500.

I sign up for those shares and have effectively increased my holding by 10,000 shares and got $100 out of it.

I am aware that my share of the company will be diluted in the process of the right issue, but is there any flaw in the above stated?

I think the share price will remain well above the 5ct as investors will try to get into a tightly held register to get access to the discounted shares.

One more thing I would appreciate if someone could explain. I am not sure what the difference between a cap raise via rights issue (shares offered to holders only) compared to a conventional share placement is. Most people on here seem not too concerned about the quite significant dilution as a result of the rights issue.


Thanks!