Subscription Right

Loading the player...

What is a 'Subscription Right'

A subscription right is the right of existing shareholders in a company to retain an equal percentage ownership over time by subscribing to new stock issuances at or below market prices. The subscription right is usually enforced by the use of rights offerings, which allow shareholders to exchange rights for shares of common stock at a price generally below what the stock is currently trading for.

Also known as the "subscription privilege" or "preemptive right" of the shareholder.

BREAKING DOWN 'Subscription Right'

Subscription rights are not necessarily guaranteed by all companies, but most have some form of dilution protection in their charters. If granted this privilege, shareholders may purchase their shares before they are offered to the secondary markets. This form of dilution protection is usually good for a few weeks before a company will go about seeking new investors in the broad market.

Investors will receive notification of their subscription right by mail (from the company itself) or through their brokers or custodians.

RELATED TERMS
  1. Subscription Price

    1. A static price at which existing shareholders can participate ...
  2. Rights Offering

    An issue of rights to a company's existing shareholders that ...
  3. Theoretical Value (Of A Right)

    The calculated value of a subscription right. The theoretical ...
  4. Rights

    A security giving stockholders entitlement to purchase new shares ...
  5. Preemptive Right

    A privilege extended to select shareholders of a corporation ...
  6. Subscribed

    Newly issued securities that an investor has agreed or stated ...
Related Articles
  1. Professionals

    Determining The Value Of Rights

    In order to determine the value of one right before the ex rights date, you must use the cum rights formula. Subtract the subscription price of the right from the market price of the stock. Once ...
  2. Rights Of Common Stockholders

    As an owner of common stock, investors are owners of the corporation. As such, investors have certain rights that are granted to all common stock holders. Preemptive Rights As a stockholder, ...
  3. Professionals

    D. Types of Dividends

    Cash A cash dividend is the most common form of dividend, and it is one that the test focuses on. A corporation will send out a cash payment in the form of a check directly to the stockholders. ...
  4. Professionals

    Other Types of Equity Securities

    FINRA Series 6 Exam Study Guide - Other Types of Equity Securities. Other equity securities: American Depository Receipts (ADRs), rights, warrants, options, Excange traded funds(ETFs), Hedge ...
  5. Professionals

    Other Equities

    Series 7 - Equities Section 3: Other Equities
  6. Investing Basics

    Knowing Your Rights As A Shareholder

    We delve into common stock owners' privileges and how to be vigilant in monitoring a company.
  7. Budgeting

    Just the Right Book Review: Is It Worth It?

    Take an in-depth look at Just the Right Book, a subscription service that delivers personalized book selections based on your reading history and preferences.
  8. 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.
  9. 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.
  10. Investing Basics

    Explaining Rights Offering

    A rights offering is an offer by a company to its existing shareholders of the right to buy additional shares in proportion to the number they already own.
RELATED FAQS
  1. What rights do all common shareholders have?

    Learn what rights all common shareholders have, and understand the remedies that can be taken if those rights are violated ... Read Answer >>
  2. 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 >>
  3. What is a direct rights offering?

    Discover what a direct rights offering is, what it means for shareholders who receive the offering, and the reasons a company ... Read Answer >>
  4. Why would a company issue a rights offering?

    Understand more about a rights offering, and learn the most common reasons a company might have to issue a rights offering, ... Read Answer >>
  5. How do subscription business models work?

    Understand how a subscription business model works and why companies prefer a subscription business model over a traditional ... Read Answer >>
  6. What are some characteristics of ordinary shares?

    Read about some of the primary characteristics of ordinary shares, also known as common shares, including voting rights and ... Read Answer >>
Hot Definitions
  1. Law Of Demand

    A microeconomic law that states that, all other factors being equal, as the price of a good or service increases, consumer ...
  2. Cost Of Debt

    The effective rate that a company pays on its current debt. This can be measured in either before- or after-tax returns; ...
  3. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  4. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  5. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  6. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
Trading Center