oversubscription privilege

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Oversubscription privilege

In a rights issue, arrangement by which shareholders are given the right to apply for any shares that are not taken up.

Oversubscription Privilege

In a new issue of a stock, the right of current shareholders to receive or purchase the rights or warrants to the new issue at a discount. This allows existing shareholders to maintain their current percentage of ownership in the company. The rights or warrants that are distributed are the rights some shareholders did not want to receive. Thus, these remaining rights or warrants are distributed among existing shareholders on a prorated basis. See also: Anti-dilution provision.

oversubscription privilege

The opportunity to purchase, on a pro rata basis, any remaining shares not already subscribed to in a new stock offering. In a typical new offering using stock rights, new shares are priced below the market price in order to ensure a successful sale. Generally, however, some stockholders will neither use nor sell their rights to buy the new shares, thus leaving some stock unsold even at the bargain price. The issuer therefore allows the stockholders to oversubscribe in anticipation of extra available shares. It is generally in the stockholder's interest to use the oversubscription privilege. Compare subscription price.
References in periodicals archive ?
Since the company's rights offering was oversubscribed, the remaining shares available for issuance to those rightsholders validly exercising oversubscription privileges will be subject to proration.
Farmers National Banc Corporation (OTCBB: FMNB), the Canfield, Ohio-based holding company for The Farmers National Bank, has said that 2,058,315 common shares have been subscribed for in its rights offering, and that all basic subscription rights and oversubscription privileges have been accepted.
Community West Bancshares (NASDAQ: CWBC), parent company of Community West Bank, has announced its intention to offer USD8m, and up to USD8.8m with oversubscription privileges, of convertible subordinated debentures which will pay interest at nine percent until conversion, redemption or maturity.