Summit renouncable Rights Issue

I am confused. I have some Summit Resources shares and I have been invited to a small number of Renouncable Rights Issue Shares at $2.49 each. The thing I don't understand is why anybody would take up this offer since they can buy them on the market for $2.20 each. There must be something I am missing. Could anyone help me out here?

HI spark

Did you receive any answer to your 2007 question about the rights issue about Summits Resource?

I was thrawling some information on the Aussie stocks last night with the past issues of the Smart Investor magazine and I came across this little gem, Summit Resources.

I see that it's share price was range bound between 1.70 and 2..90 even during the volatility of the last one year.

Any thoughts? ....by the way, did you take up the rights issue offer at 2.49 each?

Cheers, agathos.

Not all companies have a crystal ball that can be used to predict future prices

Normally the price is an average from a time period less a discount. Obviously if the price drops below it then it's a bad buy, but on the other hand if the price was well above it, it would be a good buy!

Also, it could depend on your position size. Since you most likely won't be paying brokerage. If you own less than 60 shares, it would actually be cheaper to take the $2.49 price rather than the $2.20 price plus brokerage.