oversubscription privilege

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 ?
2 percent of the total number of shares requested pursuant to holders' oversubscription privilege.
625m shares issued to Lehman) and 1,376,536 shares were issued to holders upon exercise of their oversubscription privilege.
In addition each shareholder was entitled to an oversubscription privilege up to a limit of three times their basic subscription right.
The rights offering includes an oversubscription privilege which permits each rights holder that exercises its rights in full to purchase additional shares of common stock that remain unsubscribed at the expiration of the offering.
Also, for those qualified stockholders exercising their basic subscription right in full, such stockholder may also choose to exercise an oversubscription privilege to purchase a portion of any shares that other qualified stockholders do not purchase through the exercise of their basic subscription rights.
The company said that all 31,240,472 shares, subject to subscription rights, were sold pursuant to the basic subscription privilege and the oversubscription privilege described in the prospectus.
The rights offering also includes an oversubscription privilege.
Additionally, stockholders who fully exercise all their issued rights will be entitled to subscribe for additional shares at the subscription price under an oversubscription privilege.