Rights issue

Reuters  Sep 28  Comment 
Abu Dhabi state fund Aabar Investments may refuse to invest in a 2.5 billion ringgit ($565 million) rights issue by RHB Capital in a sign of disappointment...
The Economic Times  Sep 21  Comment 
Drug discovery firm Sun Pharma Advanced Research Company (SPARC) has filed draft papers with markets regulator Sebi to raise up to Rs 250 crore through a rights issue.
Finance Asia  Sep 21  Comment 
Philip Morris is obliged to offload part of its stake in its Indonesian unit before the nation's new free-float requirements come into effect in early 2016.
newratings.com  Sep 21  Comment 
JAKARTA (dpa-AFX) - International tobacco company Philip Morris International Inc. (PMI) Monday said that PT HM Sampoerna Tbk. an indirect subsidiary of Philip Morris International Inc. will issue 7.50 percent of the total paid up capital to...
The Hindu Business Line  Sep 14  Comment 
The rights issue of Universal Cables will open on September 24 and the last date for receipt of request for split application forms would be October 7. The rights issue will close on October...
WA Business News  Sep 10  Comment 
Perth-based rare earths explorer Greenland Minerals and Energy will undertake a $6.1 million non-renounceable rights issue to fund ongoing work at its Kvanefield project.
Finance Asia  Sep 8  Comment 
RHB Capital’s rights issue signals the group’s intention to refocus on its own growth after the failure of its three-way merger with CIMB and Malaysia Building Society.
Reuters  Sep 7  Comment 
* Allays fears of Tesco rights issue (Adds detail, analyst comment, updates shares)
The Hindu Business Line  Sep 4  Comment 
Shares of Universal Cables will remain in focus at the bourses, as its board of directors meets on Monday to consider and approve the terms of the proposed rights issue. These include issu...
The Hindu Business Line  Sep 2  Comment 
The lukewarm response for the rights issue has not deterred the turnaround strategy of Metropolitan Stock Exchange (MSE),  the youngest in the dog-eat-dog capital market space. Most PSU banks...


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Rights Issue

Rights Issue is a secondary capital raising strategy by the company. It gives it's stockholders an option say 1:1 (i.e. one rights issued per stock held) for the outstanding common stocks.

Ex. Say an investor has 100 shares of a company at Rs. 10 per share with a total investment of Rs. 1000. The company's brokers informs him about the option as 1:1rights issued at Rs. 8 per share. The investor exercises the option and now get's 100 shares @ Rs. 8 each. Thus his total investment is now 8*100 + 1000 = Rs. 1800 with 100+100 = 200 shares. Average price of share = 1800/200 = Rs. 9.

If all the investors avail the option than the market price of the share would come down to Rs. 9 per share and the market cap of company for a total initial outstanding common shares of 1 million (now 2 million) would be Rs. 18 million from previous market cap of Rs. 10 million.

The EPS of the company halves if the capital raised is not used as the number of shares has doubled. If the capital raised is reinvested properly and the EBIT increases than the EPS also changes accordingly.

Investor use

As used by the investor, these are an offering of shares issued at a special price by a company to its existing shareholders in proportion to their holding of old shares. [1]

Investors in common stock occasionally receive rights offerings to purchase additional common stock below the existing market price. The stock rights were probably issued to satisfy the investor’s preemptive right to maintain an existing level of ownership in the company. Rights are issued below the existing market price to encourage the exercise of the rights. The rights are separate having their own markets. [2]

From "morally correct," "just, good, fair, proper, fitting, straight," to put right" "just, righteous, wise "honest, morally upright "just claim" "in a proper manner" [1]


  1. ‪Wall Street words: an A to Z guide to investment terms for today's investor‬ By David Logan Scott pg318
  2. Wiley CPA Exam Review 2010: Financial Accounting and Reporting by Patrick R. Delaney and O. Ray Whittington ISBN-10: 0470453516 pg585
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