Financial Times FT.com

Doubts raised about tenets of underwriting

Published: June 3 2008 00:13 | Last updated: June 3 2008 00:13

For the first time in most investors’ memory, the tried and tested British system of raising capital through an underwritten rights issue appears to have foundered. For decades, UK companies hoping to raise money by issuing shares at a discount have given existing shareholders rights of first refusal to new shares to avoid holdings being diluted.

Companies have paid banks and other financial institutions “underwriting fees” to guarantee to buy the newly-issued stock if these rights are not taken up.

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