What Does a Rights Issue Mean?

A rights issue means the issue of shares to existing shareholders at a discounted price, in proportion to their current holdings.

It is a voluntary corporate action in which a company offers its existing shareholders the opportunity to buy additional shares — usually at a price lower than the current market price.

The number of shares offered is in proportion to the shares already held by each shareholder, as recorded in the company’s books on a specific date known as the record date.

Existing shareholders can:

• Exercise their right to buy the shares,
• Renounce or sell their rights entitlement to someone else (in case of a renounceable rights issue), or
• Ignore the offer and let their rights lapse.