Assuming that there is no change in the share price during a rights issue, how is shareholder value affected by the issue?

Question

Quizplus · Accepted Answer

Shareholder value does not change during a rights issue if there is no change in the share price. This is because a rights issue is designed to raise capital by offering existing shareholders the opportunity to purchase additional shares at a discount, which dilutes the share value but also allows shareholders to maintain their proportional ownership. The overall value of the company increases due to the additional capital raised, but this is offset by the increase in the number of shares, leaving the shareholder value unchanged.

Assuming That There Is No Change in the Share Price