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Monday, September 29, 2008


Old lecturer is back. Talking about rights. Rights are privilages that a shareholder gets to buy more shares.shares will be traded down by the value of rights on ex-right day as no rights can be obtained after this date. Wealth doesn't change whether you take the share rights or not. The cost is still the same.

A new investor could buy the shares and exercise the right or buy the shares and buy more shares after the ex-rights date. An existing shareholder could sell the right before the ex-rights date or exercise the right. Dumbest thing is to let the rights lapse of to excercise a right when the share price is below the subscription price.

Renounceable rights issue. Underwriter. Low cost. No need for prospectus. Dilution of shares. Wealth transfer.

Dividend reinvestment plan. Shares issued instead of cash dividend.

Prime borrower has secured income. Non-prime doesn't. Expiration of teaser rates before jumping up to market rates. Securitising mortgage loans and getting high credit rating because the mortgage agents would only get a fee once the loans were paid back. Loans started to be offered from sub-primes.

Credit crunch: lending shrinking.

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