rights offering

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.

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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.

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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.