Rights Issue Definition
A rights issue is a type of securities offering in which new shares are sold to existing shareholders at a discounted price. The existing shareholders are given the right to purchase the new shares before they are made available to the general public.
Rights issues are typically used by companies that need to raise capital quickly. They are often used in conjunction with other types of financing, such as debt issuance or equity placement.
Rights issues can be structured in a variety of ways, but the most common structure is for the company to offer one new share for every four existing shares held. The rights may be transferable or nontransferable, and they may be exercised immediately or at some future date.
The key advantage of a rights issue is that it allows companies to raise capital without diluting the ownership interests of their existing shareholders. The disadvantage is that rights issues can be complex and expensive to administer.
