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Privilege granted shareholders of a corporation to subscribe to shares of a new issue of common stock before it is offered to the public. Such a right, which normally has a life of two to four weeks, is freely transferable and entitles the holder to buy the new common stock below the public offering price. See: Warrant.

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.


A certificate that permits the owner to purchase a certain number of shares, or, frequently, a fractional share of new stock from the issuer at a specific price. Rights are issued to existing stockholders in proportion to the number of shares the stockholders already own. Rights then may be combined with cash to purchase the new shares or they may be sold to other investors. Rights usually have value because they permit the owner to purchase shares of stock at less than the market price. A right is indicated in stock transaction tables by the symbol rt, appearing after the stock's name. Also called stock right, subscription right. See also ex-rights, preemptive right.
Should rights be sold or used?

Rights offerings refer to the right of an investor to maintain his or her percentage ownership in a company when the company decides to issue new stock. Generally the company will do so at a discount to its market price to attract buyers, thus the existing stockholders' rights have value. The decision a rights holder must make is whether to put more money into the stock of this company or to sell the rights in the open market as compensation for the dilution of his or her percentage ownership in the company. TIP: Such a purchase depends completely on the individual's circumstances, goals, prejudices, and objectives—just as in any other stock purchase—and should be approached accordingly.

Thomas J. McAllister, CFP, McAllister Financial Planning, Carmel, IN


The opportunity a corporation gives a shareholder to buy additional shares at a special price for a limited time. Shareholders who don't use their rights can sell them to other investors.
References in periodicals archive ?
Upon sale, we assign the rights to the accounts receivable to the banks.
The Second Amendment, which guarantees the right to "keep and bear arms," is easily the most controversial one.
In fact, a genuinely libertarian jurisprudence would, in the words of the legal scholar Randy Barnett, "requir[e] the state to justify its statute, whatever the status of the right at issue.
In analyzing the section of the Second Amendment that states, "A well regulated Militia, being necessary to the security of a free State," the OLC shows that this wording was never intended to mean that only people in an organized military group have the right to keep and bear arms.
After outlining his secular approach to rights, Dershowitz then applies his theory to real-life issues involving disputes over rights applications: the right to life, church-state separation, animal rights, and others.
The right to marry and beget new life has always been grounded in the duty towards the common good; for society proceeds from the family unit as the organs of the body proceed from its cells.
Indeed, our legal system does recognize a number of economic rights--notably, the right to a free public education, the right to a public defender in a criminal case, and the right to emergency medical care.
These rights are not strictly political, as the UDHR mentions: "The right to work, to protection against unemployment, and to join trade unions; the right to a standard of living adequate for health and well-being; the right to education; and the right to rest and leisure.
The warnings are designed in part to safeguard the right against compelled self-incrimination by ensuring custodial subjects that, if they choose to waive the right to silence, they will not have to face the government alone; they may have the assistance of counsel during interrogation.
The right to join a free trade union is a necessary condition of a free society and economy.
President Clinton is good at saying the right thing.
The recent editorial in this newspaper also attacked me for advocating that undocumented immigrants be accorded the right to vote in neighborhood council elections.