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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 ?
We are now able to mark the occasion and put right a historical wrong.
A spokesman for the council said: "Kirklees Building Services is to put right the damage caused to the Golcar Pocket Park during house improvement work earlier this week.
We are confident that this is an issue that will be put right.
The 27-year-old striker said: "Obviously a lot of us from last season know we have got a lot of wrongs to put right.
We will work hard to put right what we have done wrong and to improve on things,' he promised.
It said most accidents involved two or more vehicles and cost an average of pounds 1,100 to put right.
The vandalism cost pounds 291 in cleaning materials and labour to put right, but removing the paint left the stonework permanently damaged.
Besides recognizing some things that I could put right (such as returning to their rightful owners all the books on my shelves that didn't belong to me), I began to see the need of facing less tractable defects, whose existence I had never recognized before, such as my conceit and pride.
ScotRail has refused to accept any more electric trains from Birmingham company Alstom until traction faults causing breakdowns have been put right.