Question

What is meant by Rights Issue of Shares?

Answer 1

Answer:

A rights offer is one way a business can raise secondary capital. It involves the issue of rights to a company's existing shareholders that entitles them to buy additional shares in proportion to their existing holdings, within a fixed time period at a specified price. Shareholders can buy new shares at a discount for a certain period. With a rights issue, because more shares are issued to the market, the stock price is diluted and will likely go down. They can choose to exercise the option of not buying any extra shares.