can people be rich from investing in Right issues?> if yes can you explain how please. I really dont understand this thing. and how is it related to stock investment
Yes, people can make a lot of money from Rights Issues, but it depends on how they use the opportunity and the quality of the company. Let me explain it in a very simple way and how it connects to stock investing.
1. What a Rights Issue Means
A Rights Issue happens when a company that is already listed on the stock market offers existing shareholders the chance to buy more shares at a cheaper price.
For example:
You already own 1,000 shares of a company.
The company announces a Rights Issue of 1 for 2 at ₦5.
This means:
For every 2 shares you own, you can buy 1 new share.
The price is ₦5, which is usually cheaper than the market price.
If the market price is ₦8, you are allowed to buy at ₦5.
2. Why Companies Do Rights Issues
Companies raise money through rights issues to:
Expand their business
Pay debts
Build new factories
Grow operations
So they give existing shareholders first opportunity before the public.
3. How Investors Make Money From Rights Issues
There are three main ways investors profit.
Buying Cheap Shares
Example:
Market price = ₦8
Rights issue price = ₦5
You buy at ₦5.
If the price later goes to ₦10, you gain:
Profit = ₦10 − ₦5 = ₦5 per share
If you bought 10,000 shares:
Profit = ₦50,000
Selling the Rights (Renunciation)
Sometimes you don't have money to buy the shares.
Instead, you can sell the rights to another investor.
Example:
Your right may trade at ₦1.50 per right.
If you have 5,000 rights:
5,000 × ₦1.50 = ₦7,500 profit without buying shares.
Long-Term Growth
If the company uses the funds well, the business becomes bigger and the share price grows over time.
Many long-term investors make money this way.
4. How It Relates to Stock Investment
A Rights Issue only happens because you already own the stock.
So the process is:
You buy shares of a company on the stock market.
The company later announces a rights issue.
As a shareholder, you get priority access to cheaper shares.
So rights issues are simply a special opportunity given to stock investors.
5. Real Situation on the Nigerian Stock Exchange
On the Nigerian Exchange Group, many companies have done rights issues, including:
Access Holdings Plc
Zenith Bank Plc
Fidelity Bank Plc
Investors who participated early in some of these offers made good profits later.
6. Important Warning
Not every rights issue is good.
Sometimes:
The company is raising money because it is in financial trouble
The share price may fall after the rights issue
So investors must check:
Company performance
Debt level
Growth plan
Simple summary
Rights Issue =
Existing shareholders allowed to buy more shares cheaper than the market price.
Investors make money by:
Buying cheap and selling higher
Selling the rights
Holding for long-term growth.
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