On the day that Time Warner announced it would raise new equity using a variable price rights offering, its stock price dropped by $11.25. During the week, Time Warner's equity value declined from $6.9 billion to $5.5 billion. The company and its investment bankers argued that the drop in share value was transitory and reflected investor confusion over the novelty of the rights offering.

It is more likely that Time Warner's price dropped because the market viewed unfavorably the company's plans for the capital it was attempting to raise. Investors apparently believed that the company would continue to pursue the uneconomic strategies including the Time Warner merger itself that had now forced it to seek funds in the equity market. For shareholders, the reduction in company leverage that the offering's proceeds would have afforded would merely have given Time Warner management more license to invest in unprofitable ventures.