Avoid recent rights issues

Banks and property firms have led a flurry of rights issues recently. But investors should give most of them a wide berth. Tim Bennett explains why.

Hopes that the British economy might have turned a corner have led to a "flurry of rights issues", notes Dylan Lobo on Citywire.co.uk. Leading the charge are banks and property firms, anxious to shore up battered balance sheets with fresh capital. But investors should give most of them a wide berth.

A rights issue is often a last resort. That's because it suggests that cheaper sources of raising capital such as existing profits and cash flow (organic growth), or bank loans and bonds have been exhausted. It gives a company the chance to raise fresh capital from existing shareholders who normally have a 'pre-emptive' right to buy first, assuming this has not already been waived by agreement. So what should you do?

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Tim graduated with a history degree from Cambridge University in 1989 and, after a year of travelling, joined the financial services firm Ernst and Young in 1990, qualifying as a chartered accountant in 1994.

He then moved into financial markets training, designing and running a variety of courses at graduate level and beyond for a range of organisations including the Securities and Investment Institute and UBS. He joined MoneyWeek in 2007.