There are many ways to measure the value of a company. These are all used in different circumstances.
For example (and paraphrasing the correct technical names):
1. net asset value;
2. going concern value;
3. fire sale value;
4. balance sheet equity;
5. nominal share value;
6. market capitalisation value
Etc. etc.
For your game, what you seem to be talking about is market capitalisation value. One way of looking at this is the total value at the current stock exchange prices of all the shares issued by the company. So if the shares are trading at £10 each and there are a million issued shares, then the market capitalisation value is £10m.
This is quite different from nominal value. Nominal value is the value given to the share when first issued by the company. You can, for example, have shares with a nominal value of £1 which, because of how successful the company is, are actually being traded for £10.
Obviously a rights issue of the type proposed in the last post does (or should) decrease the value of the shares. If the company is worth £10m and there are 100 issued shares, each share is worth £10,000. If another 100 shares are issued then the value of each share should be halved to £5,000.
Note that this is all a simplification and assumes a rational market and rational investors. It is, for example, an indicia of irrational bubble markets (such as the Dutch tulip mania, the English south sea bubble and, in recent times, the internet stock mania) that rights issues actually cause the price of shares to INCREASE. This is usually the point where the sensible people sell and leave the idiots holding the baby when the market crashes. For a very entertaining and informative discussion of the operation of bubble economies, see Edward Chancellor's book: "Devil take the hindmost".
Philip
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