In 2021, the mining company Silver Mines Limited announced a capital-raising plan to fund its exploration and development activities. The company offered new shares to existing shareholders through a renounceable rights issue. Under the terms of the rights issue, existing shareholders were given the option to buy new shares at a discounted price of AUD 0.11 per share. These renounceable rights allowed shareholders to either exercise their right to buy new shares at a discounted price, or sell their rights to buy to another investor. but it also resulted in a temporary drop in the company's share price.

Explain the renounceable rights issue of ordinary shares and discuss the advantages and disadvantages. 

Explain dilute and provide a reason why it led to a drop of company share price.

Answer rating: 100% (QA)

A renounceable rights issue of ordinary shares is a method used by companies to raise capital by offering their existing shareholders the opportunity ... View the full answer