What is a cash call?

A cash call is a request made by a company to its shareholders for additional funds to meet its financial obligations or to finance new projects. Cash calls can be made in a variety of ways, such as through a rights issue, where shareholders are given the opportunity to purchase additional shares at a discounted price, or through a simple request for cash contributions.

Cash calls are often seen as a sign that a company is facing financial difficulties and may be struggling to meet its cash flow needs. Shareholders typically have the option to either provide the additional funds requested or risk dilution of their ownership stake in the company.

Companies may also use cash calls as a way to raise capital for growth initiatives, such as expanding into new markets or investing in research and development. In these cases, cash calls can be seen as a positive sign that the company is seeking to grow and improve its business.

Overall, cash calls can have both positive and negative implications for shareholders, depending on the circumstances and the reasons behind the request. It is important for investors to carefully consider the implications of a cash call before deciding whether or not to participate.