Right Issue

Rights offering (issue) is an issue of rights to a company's existing shareholders that entitles them to subscribe additional shares directly from the company in proportion to their existing holdings, within a fixed time period.

Rights are often transferable, allowing the holder to sell them on the secondary market.

  • Companies generally offer rights when they need to raise money
  • They may need to raise money for a variety of reasons, for example to pay off debt, purchase equipment or acquire another company
  • The benefit to a company of raising money through a rights offering is that the company can bypass underwriting fees
  • In some cases, a company may use a rights offering to raise money if there are no other viable financing alternatives
  • This is common during economic slowdowns when banks become reluctant to lend to companies