Rights shares

A Rights Share is an issue of additional shares offered by a company to its existing shareholders in proportion to their current holdings. It is a way for companies to raise additional capital without going to the public directly. Rights issues allow shareholders to purchase new shares at a price usually lower than the current market price, giving them the first right to maintain or even increase their ownership in the company.

Companies generally issue rights shares to fund business expansion, repay debt, or strengthen their balance sheet. Since the shares are offered at a discount, existing shareholders benefit by getting a preferential opportunity before outsiders.

Key features of Rights Shares:

1. Exclusive to Existing Shareholders – Only current shareholders can subscribe, in proportion to their holdings.

2. Discounted Price – Usually offered below the prevailing market price.

3. Optional – Shareholders can subscribe, ignore, or even sell their rights entitlement.

4. Capital Raising Tool – Helps companies fund growth or reduce liabilities.

5. Ownership Protection – Enables shareholders to avoid dilution of stake.