Rights

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What are 'Rights'

Rights give 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."

BREAKING DOWN '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.

RELATED TERMS
  1. Theoretical Value (Of A Right)

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  3. Theoretical Ex-Rights Price

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  5. Cum Rights

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RELATED FAQS
  1. How are rights distributed in a rights offering?

    Learn about stock rights offerings that companies may make, and discover how the rights are distributed among the company's ... Read Answer >>
  2. Why would a company issue a rights offering?

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  3. What is a direct rights offering?

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