Stock Rights Issue

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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.
 

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