What is a share issue?

Two kinds of issue

A company that needs money can sell new shares. The money goes to the company, and it may be for a purchase or to pay down debt. In some issues it needs the money to keep going, and the terms say so.

There are two main ways. In a rights issue, every owner gets the right to buy new shares in proportion to what they hold. In an offering to new buyers, shares go to others, and existing owners end up with a smaller part of the company unless they buy too.

Why the price falls without you losing anything

The new shares cost less than the market price. Together with the old ones, the price becomes an average, called the theoretical price. The gap to the old price is what a right is worth.

You own 100 shares, worth $4,000. The company offers 1 new share per 4 old at $24.00.

Net means that money you pay is taken off and money you get is counted. If you take part, you pay $600 for 25 new shares and keep the same value as before, plus what you put in. If you sell the rights, you get $320 and shares worth $3,680. If you do nothing, the rights expire worthless and all you have is the shares: $3,680. That last row is the expensive one. What the price does next is another matter, so these are the numbers right after the issue.

Work out your own

Enter the terms of your issue. The example above is filled in.

Your stake is what changes if you don't take part. In the example it is 80% of what it was. That is dilution. A stock split is different: everyone gets more shares and nobody's stake changes.

Sources

• US Securities and Exchange Commission, Stock Split, on how a split differs from issuing new shares, read on 5 November 2026.