As the world starts to reopen and reconnect, companies severely affected by the Covid-19 pandemic are beginning to implement their recovery plans.

One of these is Air New Zealand (NZX: AIR), who recently announced a recapitalisation package that includes a renounceable Rights Offer to shareholders.

Here’s what we think investors should be aware of when considering this offer.

What You Should Know
Air New Zealand has announced a 2:1 rights issue, which enables existing shareholders to buy up to two shares for each share they currently own. The new shares will be issued at 53c each, which appears to be a massive discount to the pre-announcement share price of $1.37.

However, investors should be aware that, by issuing so many shares, Air New Zealand’s value will be diluted, with the post-issue price likely to be a little over 80c.

This is a massive loss to anyone who bought the shares in recent years, that will be only partially made up by the gain that can be made on buying the new shares.

The Stockfox team’s view is investors need to look at what their initial entry price was and calculate the benefit from making a further investment. We suspect that, for many, there may be very little upside. If so, you may wish to consider selling your rights, which are tradable through your broker.