Rights offering

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Rights offering

Issuance to shareholders that allows them to purchase additional shares, usually at a discount to market price. Holdings of shareholders who do not exercise rights are usually diluted by the offering. Rights are often transferable, allowing the holder to sell them on the open market to others who may wish to exercise them. Rights offerings are particularly common to closed-end funds, which cannot otherwise issue additional common stock.

Rights Offering

A popular means of raising capital by offering shareholders the opportunity to buy additional shares of the same stock at a price below the current market value.

Rights Offering

In stock, the ability of a shareholder to maintain the same percentage of ownership in a company should the company issue more stock by buying a proportional number of shares at or below the market price. This protects the investor from devaluation of his/her shares if the company decides to hold a round of financing. The purchase of this proportional number of shares usually takes place before the new issue is offered to the secondary market, and must be exercised before a certain date (known as the expiration date) if the shareholder is to maintain the same percentage of ownership. Rights offerings or issues are also called subscription rights or simply rights. See also: Anti-dilution provision.

rights offering

The distribution to existing owners of rights to purchase shares of stock as part of a new stock offering. A company uses a rights offering when it sells new shares to existing shareholders rather than selling new shares to the entire investment community. The rights are used as a means to distribute new shares to existing holders on the basis of the shares each holder already owns. See also oversubscription privilege, preemptive right.

Rights offering.

In a rights offering, also known as a subscription right, a company offers existing shareholders the opportunity to buy additional shares of company stock in proportion to the number they already own before any new shares are offered to the public.

Such an offering is usually mandated by the corporate charter.

To act on the offering, you turn over the rights you receive, typically one for each share of stock you own, and the money needed to make the purchase within the required period, often two to four weeks. The amount of money that's required is known as the subscription price.

You don't have to buy the additional shares, and you can transfer your rights to someone else if you prefer. But buying helps you maintain the same percentage of ownership you had in the company before the new shares were issued rather than having that percentage diluted.