Rights Offering (Issue)

AAA

DEFINITION of 'Rights Offering (Issue)'

An issue of rights to a company's existing shareholders that entitles them to buy additional shares directly from the company in proportion to their existing holdings, within a fixed time period. In a rights offering, the subscription price at which each share may be purchased in generally at a discount to the current market price. Rights are often transferable, allowing the holder to sell them on the open market.

INVESTOPEDIA EXPLAINS 'Rights Offering (Issue)'

For example, a company whose stock is trading at $20 may announce a rights offering whereby its shareholders will be granted one right for each share held by them, with four rights required to buy each new share at a subscription price of $19. The company will also specify that the rights expire on a certain date, which is usually anywhere from one to three months from the date of announcement of the rights offering.

Companies typically issue rights to give their existing shareholders the opportunity to buy additional shares before other buyers, and also to enable current shareholders to maintain their proportionate stake in the company.
RELATED TERMS
  1. Follow-On Offering

    An issue of shares of stock that comes after a company has already ...
  2. Rights

    A security giving stockholders entitlement to purchase new shares ...
  3. Open Offer

    A secondary market offering that is similar to a rights issue ...
  4. Oversubscription Privilege

    A privilege provided to existing shareholders in a company when ...
  5. Theoretical Ex-Rights Price

    The market price that a stock will theoretically have following ...
  6. Subscription Right

    The right of existing shareholders in a company to retain an ...
Related Articles
  1. Investing

    How do I calculate the adjusted closing price for a stock?

    When trading is done for the day on a recognized exchange, all stocks are priced at close. The price that is quoted at the end of the trading day is the price of the last lot of stock that was ...
  2. Bonds & Fixed Income

    Introduction To Convertible Preferred Shares

    These securities offer an answer for investors who want the profit potential of stocks but not the risk.
  3. 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.
  4. 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.
  5. 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.
  6. Investing

    I get multiple mailings to my house from companies that my spouse, children and I all own. Is there ...

    It's not uncommon for there to be more than one investment account holder in one household. If multiple members of your household are shareholders of the same company, your residence might get ...
  7. Because the difference between the number of authorized and outstanding shares can be so large, it's important that you realize what they are and which figures the company is using
    Investing Basics

    The Basics Of Outstanding Shares And The Float

    We go over different types of shares and what investors need to know about them.
  8. Investing

    How Your Vote Can Change Corporate Policy

    Shareholders are getting a bigger say in how companies are run. Find out how you can be heard.
  9. Investing

    What is the difference between a shareholder and a stakeholder?

    Shareholders are stakeholders in a corporation, but stakeholders are not always shareholders. A shareholder owns part of a company through stock ownership, while a stakeholder is interested in ...
  10. Insurance

    Evaluating The Board Of Directors

    Corporate structure can tell you a lot about a company's potential. Learn more here.

You May Also Like

Hot Definitions
  1. Christmas Island Dollar

    The former currency of Christmas Island, an Australian island in the Indian Ocean that was discovered on December 25, 1643. ...
  2. Santa Claus Rally

    A surge in the price of stocks that often occurs in the week between Christmas and New Year's Day. There are numerous explanations ...
  3. Commodity

    1. A basic good used in commerce that is interchangeable with other commodities of the same type. Commodities are most often ...
  4. Deferred Revenue

    Advance payments or unearned revenue, recorded on the recipient's balance sheet as a liability, until the services have been ...
  5. Multinational Corporation - MNC

    A corporation that has its facilities and other assets in at least one country other than its home country. Such companies ...
  6. SWOT Analysis

    A tool that identifies the strengths, weaknesses, opportunities and threats of an organization. Specifically, SWOT is a basic, ...
Trading Center