ALL BUSINESS: Investors on losing end when capital raised

A similar scenario also played out earlier in April when Washington Mutual said it would raise $7 billion from an investor group led by private-equity firm TPG. The Seattle-based thrift privately placed $1.5 billion in stock, sold at a 33 percent discount to where the stock had been trading before the announcement. Investors will also receive $5.5 billion in convertible preferred shares, also at a discount.

But does raising capital have to sell current shareholders so short? Absolutely not and it's up to existing shareholders to make it clear to nation's financial companies that they won't stand for it.

A preferred route might be like the one taken by Royal Bank of Scotland, which announced on April 22 it would do a "rights issue" to shore up its capital by nearly $24 billion. That's when a publicly traded company offers existing shareholders the opportunity to buy company shares at a discounted price within a certain time frame.

RBS, which has seen its capital depleted by the global credit squeeze, and by the acquisition it led last year of Dutch bank ABN Amro, will seek approval for the rights offering during its annual meeting next month. It wants to offer current investors 11 new shares for every 18 existing shares at $3.98 each a 46 percent discount to where the stock was trading before the deal was announced.

That deal would allow the company to raise capital without selling a major stake to new investors. But it also puts existing shareholders in the position of facing bigger losses should the business not improve in the months ahead.

Still, there are some incentives for shareholders to participate if they get new shares for less than the current stock price, they have a better opportunity to realize gains and that might help offset losses they've already had.

Given what investors have been through, there is something to be said about having a chance at some winnings.

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Rachel Beck is the national business columnist for The Associated Press. Write to her at rbeck(at)ap.org