How the state of the directors doesnt gets DILUTED when the company makes RIGHT ISSUE?
4 Replies
janak
(post graduation)
(1327 Points)
Replied 01 August 2010
i m not geeting yr point ...........please elobrate...
S.K.Bapna
(Student)
(187 Points)
Replied 02 August 2010
I mean that if a co. has 10000 equity shares out of which 55% (5500) of equity is of Directors and remaining 45%(4500) of equity is of public.
Later if the wants more funds for expansion then if company makes RIGHT ISSUE of 5000 equity shares to the public (i.e. to existing share holders) then how the stake of the directors which was earlier 55% is not diluted?
I mean if becomes less than 51% the management will be under the control of public .
sai
(student)
(48 Points)
Replied 02 August 2010
In this case, right shares are issued to all the shareholders including directors.Then the directors would be holding (5500+ 5500*5000/10000=5500+2750)8250shares i.e,55% (8250/15000).
sai
(student)
(48 Points)
Replied 02 August 2010
Hence, the directors shareholding% remains the same provided the directors exercise their rights.
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