Rights were worth 20 cents,as issued to you.(now worth 25 cents)
Now 10 of these and $2.25 will get you a new share.
so, you have to exercise,or you will have your stock diluted to you.
if you are not going to excercise,you should sell your shares and your rights and be out of here.
is my logic correct?
Deal can't be all bad,since mcewen stands behind it,financially.
Since it takes 10 of your rights to buy a new share,THE RIGHTS ARE ONLY 'PROTECTING' 10% OF YOUR SHARES.
Thus,90% will be diluted.
Seems to me best bet is to sell everything out now,(or at least 90% of your holdings,and end up with only 10% of your shares,all of which will be protected against dilution)
Any comments or other way of looking at this??
Actutally gormdd540, that isn't quite the way that I would look at it.
They need an amount of cash equal to 10% of the o/s captial. So yours, and everyone's holdings, are going to be diluted by 10% from the company's point of view.
But, they're a good company and they don't want you to get screwed unless you choose to get screwed. So how do they allow you to choose to not get diluted by 10%? If they just offer new stock through a syndication, all of us current stockholders get screwed. The solution was to somehow allow all the current stockholders a chance to get in on the new issue.
The rights give you a sort of 'right of first refusal'. You can be the one to contribute (proportionally) 10% to the company, or you can relinquish your right and let someone else do it. If you sell the rights on the open market, whoever buys them is buying the right to contribute your portion of the 10% that they need. If you hold your rights and do not exercise them, McEwen is going to put in the 10% that you decided not to put in.