Rights

AAA

DEFINITION of 'Rights'

A security giving stockholders entitlement to purchase new shares issued by the corporation at a predetermined price (normally at a discount to the current market price) in proportion to the number of shares already owned. Rights are issued only for a short period of time, after which they expire.

Also known as "subscription rights" or "share purchase rights."

INVESTOPEDIA EXPLAINS 'Rights'

Rights can and do trade independently of the underlying stock on an exchange. Similar to options, the price of a right is determined by a number of factors, such as its subscription price, the underlying stock price, its volatility, interest rates and time to expiration. The intrinsic or theoretical value of a right during the cum rights period - when the stock trades with the rights attached - is different from the value of a right during the ex-rights period, when it trades independently.

VIDEO

RELATED TERMS
  1. Distribution

    1. When trading volume is higher than that of the previous day ...
  2. Rights Offering (Issue)

    An issue of rights to a company's existing shareholders that ...
  3. Cum Rights

    A shareholder of record that qualifies for a rights offering ...
  4. Share Purchase Rights

    A type of security that gives the holder the option, but not ...
  5. XRT

    A notation on a ticker tape that is used to indicate that a security ...
  6. Ex-Rights

    Shares of stock that are trading but no longer have rights attached ...
RELATED FAQS
  1. No results found.
Related Articles
  1. Investing Basics

    Investing In Stock Rights And Warrants

    Many companies choose to issue rights or warrants as an alternative means of generating capital to avoid dilution of existing share value.
  2. Bonds & Fixed Income

    What Are Corporate Actions?

    Be a savvy investor - learn how corporate actions affect you as a shareholder.
  3. Investing Basics

    What Owning A Stock Actually Means

    Think owning a stock gives you special privileges with the company? Think again.
  4. Options & Futures

    Understanding Rights Issues

    Not sure what to do if a company invites you to buy more shares at discount? Here are some of your options.
  5. Investing

    Additional Paid-In Capital

    Additional paid-in capital is an account in the equity section of a balance sheet. It represents the additional amount paid for the company’s shares over the par value of the shares. Additional ...
  6. Investing

    Who are Stakeholders?

    “Stakeholder” is used in commerce to describe any party who has an interest in a business or enterprise. Traditionally, stakeholders in a corporation are shareholders, employees, customers and ...
  7. Investing Basics

    How a Stock Buyback Works: MasterCard

    Stock buyback refers to publicly traded companies buying back their shares from shareholders. This reduces the amount of outstanding shares in the market and typically, based on simple market ...
  8. Investing

    What's Share Capital?

    Share capital, also called equity financing, is the total amount of money and property a company has received for selling its shares to shareholders.
  9. Economics

    Analyzing Warren Buffett's 2013 Famous Shareholder Letter

    Reading the chairman of Berkshire Hathaway's letters has been one of the best sources of investment education for value investors around the world.
  10. Mutual Funds & ETFs

    Revealed: America’s Best (And Worst) Airlines

    The folks PO'd enough to vent about it on Twitter, “Those #AmericanAirlines losers canceled my flight!” As it turns out, those tweets can be valuable.

You May Also Like

Hot Definitions
  1. Sunk Cost

    A cost that has already been incurred and thus cannot be recovered. A sunk cost differs from other, future costs that a business ...
  2. Technical Skills

    1. The knowledge and abilities needed to accomplish mathematical, engineering, scientific or computer-related duties, as ...
  3. Prepaid Expense

    A type of asset that arises on a balance sheet as a result of business making payments for goods and services to be received ...
  4. Gordon Growth Model

    A model for determining the intrinsic value of a stock, based on a future series of dividends that grow at a constant rate. ...
  5. Cost Accounting

    A type of accounting process that aims to capture a company's costs of production by assessing the input costs of each step ...
  6. Law Of Supply

    A microeconomic law stating that, all other factors being equal, as the price of a good or service increases, the quantity ...
Trading Center