I understand that the rise on the AXMR is one of the methods that the underwriters ultilise to encourage people to take up the rights issue. However, you DO NOT have to take up the new issue even if you bought the rights. The main driver for encouraging people to take up the new issue therefore is the price of AXM. Interestingly, the sp goes the other way – down!
In the past, I thought the underwriters wanted to take up the shortfall in order to gain any upside from the sp. I have been proven wrong with this idea. What makes me confused is the fact that the underwriters are losing money when the sp is down all the way from the issue price. Would it be the same this time? It seems so! Why did they underwrite the new issue if they didn’t have the ability to make sure they won’t loss money? Or should I say, why the hell would they underwrite AXM when they knew they would loss money?
I do not understand!
Regards, TT
AXM Price at posting:
3.4¢ Sentiment: Sell Disclosure: Not Held
