1

Could AAPL offer all shareholders a non-transferable right to purchase two shares at a 20% discount (from today's price, exercisable for one month) for each share they own?

This announcement will (almost certainly) cause the AAPL share price to immediately fall, but will provide capital for AAPL since investors will exercise their rights to avoid dilution (assuming investors expect that AAPL can invest just as effectively as they can).

I've had this happen to me on some stocks and believe it could bully me into holding more than I want temporarily (while waiting for the rights-to-stock conversion) if the stock is difficult to short and if the SEC allowed rights offerings to purchase more shares than owned (e.g., 2-for-1, as in the above AAPL example).

Instead of AAPL, what about ETFs (like SPY) or CEFs (like JPS)? I'm actually more concerned with these because shareholders here don't get any control/vote to change management's rights offerings.

I'm just trying to understand government limitations, not practical points like "AAPL would not do this because they have too much cash already" or "Good companies can just sell stock in the open market, without any discount, to raise capital". I am worried more about bad companies and am trying to understand how much pressure they could put on investors to contribute more.

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Browse other questions tagged or ask your own question.