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What is the Maximum amount at which a right can be sold?plz explain with numericals!


lakshmi kollipara

lakshmi kollipara

CA Inter

1K+

17-May-20 00:11

17

Answers (6)

Best Answer

There is no specific provision for rights issue price. However, the right issue is always little less than market price so that investors will be ready to invest in the company. Example, reliance shares market price currently is Rs. 1438 but rights issue price 1257 approx.

Yaa...that's ok but what I asked is not about at what price the right can be issued . At what price the right given to us can be sold to others? And the answer I got is the right can be sold at max price which is the difference between market price and right price i.e,as per your example right can be sold at max 181 rupees(1438-1257). Thanks for reply!


lakshmi kollipara

lakshmi kollipara

CA Inter

1K+

22-May-20 15:17

There is no specific provision for rights issue price. However, the right issue is always little less than market price so that investors will be ready to invest in the company. Example, reliance shares market price currently is Rs. 1438 but rights issue price 1257 approx.


ruchi lahoti

ruchi lahoti

Moderator

22-May-20 14:02

(1) Rights issue price - no statutory limit, generally less than market price (2) Amount at which right is renounced - shareholderâ??s wish. There is no provision for limit

There might not be provision but practically will anyone renounce the right at a price more than such difference ? When we are renouncing the rights ,we'll collect a amount from the buyer which is the amount for renouncing the right but not for selling the right share.that means buyer has to pay some money for purchasing the right from us and some money to company for purchasing the share. From buyers view for example as above ... Byer has to pay let us assume 181 to us for buying the right and 1257 to company for purchasing the share ... So if we sell the right at price more than 181 then the cost of right exceeds the market price which is 1438.in such a case the buyer will be interested in buying in the market only ,where he'll get at the market price...


lakshmi kollipara

lakshmi kollipara

CA Inter

1K+

22-May-20 15:35

Yes correct!


ruchi lahoti

ruchi lahoti

Moderator

22-May-20 15:36

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