What is the rights issue?

The rights issue is a company offering existing shareholders the rights to buy more shares at a discounted rate.

This simply means the rights issue allows existing shareholders to increase their stake in the company at a discount. This gives exclusive rights to existing shareholders to buy more shares, and this is done in ratios.

Suppose a company is offering rights issue in the ratio of 1:15, which means existing shareholders will have a chance to buy an extra share at a discounted rate for every 15 shares they hold.

When does a company offer a rights issue?

The rights issue is a way for companies to raise money from their existing shareholders. Since rights issues are non-dilutive, companies prefer this over issuing normal stocks in the open market.

Discounted rates induce company owners to buy more shares, building shareholders’ confidence.

How to become eligible for a rights issue?

You can become eligible for a rights issue if you own the shares on or before the company’s record date.

Subscribe to a rights issue only if you are satisfied with the company’s financial and expansion plans.

Published by Atul Kumar Pandey

Hi, I'm creator of atulhost, comes from business management and tech background. I love to do research on modern business insights and latest technological solutions.

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