Rights issues allow shareholders to increase their wealth because they can buy shares at a discount.

Question

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Rights issues allow existing shareholders to buy additional shares at a discount, but this does not inherently increase their wealth. The discount simply offers a potentially lower cost basis for the new shares, but the overall value of the company and, by extension, the value of the shareholders' total holdings, is not automatically increased by the rights issue itself.

Rights Issues Allow Shareholders to Increase Their Wealth Because They