What may seem cynical but in reality this metaphor might help...

What may seem cynical but in reality this metaphor might help understand it;

A share issue is much like money printing in a fiat currency system. Adding more currency dilutes the value of the existing currency. If owned goods at the time of dilution the side effect (inflation of the goods) will be seen some time latter. However, if you just had cash then you would bear the deflationary effect of money printing. The reserve and their cohorts first users of the printed currency just stole some of your bucks.

Shares issues are not much different. Just that your holding before an issue are like a cash holding when the private reserve banks dilute our money. ie if you do not take up the new issue then the value of your holding is theoretically devalued. "Theoretically" because the share price is continually fluctuating and in a dire case like GCY recently taking up ones entitlement is akin to accepting a capital loss.

Here's an example from an old book by Ron Bennetts The Stockmarket p 42

"RIGHTS CALCULATION
Should you take up the offer? Lets us use the example of ABC Ltd 1 for 5 rights issue with the market price at $1.50 and application money of $1.20. When calculating whether or not to take up the issue, imagine you have the potential to own a parcel of six shares. That parcel would consist of:
5 existing shares at $1.50 (market price) each = $7.50
1 new share at $1.20 (application money) = $1.20
Total cost of parcel = $8.70
Average cost of shares = $8.70 / 6
= $1.45
In order to estimate the theoretical value of the rights, subtract the cost of the new share which is $1.20 from he average cost of the shares after the issue which is $1.45. This leaves 25 cents as the theoretical value of the rights. This compensates for the 5 cents each that will be the capital loss on the original shares you owned."

BTW have you noticed PRX director Brett Smith has become a director of TAM ?