Next video:
Loading the player...

Rights are offers that allow existing stockholders to buy additional shares at a predetermined price, for a set time period. Shareholders do not have to exercise these rights. They could let them expire. Alternatively, they could be traded in the open market
 
Why do companies offer rights? Sometimes tapping existing shareholders may be the best way to raise additional capital if they have difficulty attracting outside investors. For this reason, heavily indebted businesses will sometimes use a rights issue to pay down their obligations.
 

Related Articles
  1. Investing

    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.
  2. Investing

    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.
  3. Managing Wealth

    Knowing Your Rights As A Shareholder

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

    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.
  5. Investing

    Who is a Shareholder?

    A shareholder is a person, company or other entity that owns at least one share of a company’s stock.
  6. Managing Wealth

    Knowing Your Rights As A Shareholder

    Common shareholders typically enjoy six main rights.
  7. Investing

    Carl Icahn Reveals Pricing Terms on Rights Offering

    Carl Icahn's Icahn Enterprises LP previously announced a rights offering, and now the company has followed up with the pricing terms.
  8. Investing

    How Dividends Affect Stockholders' Equity

    Find out how dividends affect a company's stockholders' equity and how the accounting process changes based on the type of dividend issued.
  9. Investing

    What are Issued Shares?

    Issued shares are the amount of authorized stocks a company’s shareholders buy and own. The annual report shows the number of outstanding shares.
  10. Investing

    Why Do Companies Care About Their Stock Prices?

    Read on to learn more about the nature of stocks and the true meaning of ownership.
Hot Definitions
  1. Fixed-Income Security

    An investment that provides a return in the form of fixed periodic payments and the eventual return of principal at maturity. ...
  2. Free Cash Flow - FCF

    A measure of financial performance calculated as operating cash flow minus capital expenditures. Free cash flow (FCF) represents ...
  3. Leverage Ratio

    Any ratio used to calculate the financial leverage of a company to get an idea of the company's methods of financing or to ...
  4. Two And Twenty

    A type of compensation structure that hedge fund managers typically employ in which part of compensation is performance based. ...
  5. Market Capitalization

    The total dollar market value of all of a company's outstanding shares. Market capitalization is calculated by multiplying ...
  6. Expense Ratio

    A measure of what it costs an investment company to operate a mutual fund. An expense ratio is determined through an annual ...
Trading Center