Rights Issues Rampant in City of London

Industrial materials firm Cookson has launched a rights issue. They are asking for £240m at 37% discount. The underwriters are JP Morgan / Merrill Lynch. The company is also cutting 1,250 jobs. Last December Cookson sold off its ceramic filters business to companies owned by Sud-Chemie AG, a chemicals company specialising in adsorbents. The history of ceramic filters, including piezoelectric ceramics, is detailed in this article by Satoru Fujishima. Cookson is a member of various trade organizations, such as the CEA, which has over 2000 member companies.

A rights issue is when a company issues new shares (which it usually offers at a deep discount to the prevailing market price; 20% is not uncommon) to existing shareholders. For this reason, the share price of a company usually falls after a rights issue. Essentially, a rights issue gives shareholders first refusal on the right to buy additional shares as compensation for the price fall after a rights issue (pre-emption rights, in other words).

Highly leveraged Xstrata also announced a heavily discounted (66%) rights issue in a bid to slash its debt from $16.3bn to $12.6bn. The issue ran into controversy that major shareholder Glencore was being offered favourable terms (underwriters: Glencore, JPM and DB). Dissenters included the ABI whose members, 400-strong, constitute 20% of investments in the London stock market.