Re: United Utilities rights issue-whats it all about please?

They want some more money, to pay for new water pipes or whatever, so they are offering to sell new shares to people who are already shareholders - under UK company law if a company does that with more than a small number of shares they have to be offered to the current shareholders pro-rata, 5 for 9 in this case. The new shares are offered at a lower price than the existing shares, but that doesn't mean you get a bargain if you accept the offer because the rights, i.e. the offer to buy, are worth (near enough) the difference.

In this case it's a bit more complex than usual because they don't want all the money at once, so what they are offering you are A shares which are effectively worth half a normal share, but which also carry a right to "upgrade" them next year to a full share, at a further cost.

Options: 1) Take up the rights, if you have the cash spare. That's more-or-less the same as buying new shares in the stockmarket, except that you don't have to pay any commission to a broker.

2) Sell the rights in the market. Until the expiry date for the offer the rights can be traded like shares, and you can see the current price in the usual places (web sites, newspapers etc). 3) Do nothing. In that case the company will effectively do 2) on your behalf and you will get whatever the market offered.

You can also do a combination of the above. One possibility is known as "tail swallowing", you sell enough rights to raise enough money to exercise the remaining rights, so you end up cash neutral - but you will probably have to pay commission on the sale, which will mean some level of loss overall.