Rights issue

The Hindu Business Line  Jun 8  Comment 
The board of directors of Max Ventures and Industries, which plans to raise ₹450 crore through a rights issue, will approve the issue price, record da
The Hindu Business Line  Jun 1  Comment 
The board of Can Fin Homes will meet on Saturday to consider raising funds by way of issue of equity shares through rights issue and/or qualified inst
guardian.co.uk  Apr 23  Comment 
Chief executive of debt-laden outsourcing company dismisses comparisons to Carillion Capita, the debt-laden outsourcing company behind the London congestion charge and the BBC licence fee, has been forced into a £701m cash call to shore up its...
Financial Times  Apr 23  Comment 
Outsourcer’s shares have been hit hard since January profit warning
TechCrunch  Mar 21  Comment 
Twitter has found itself under fire again. This time, it’s coming from Amnesty International, a non-governmental organization that focuses on human rights. Amnesty International’s new report, “#ToxicTwitter: Violence and abuse against women...
guardian.co.uk  Mar 16  Comment 
UK drinks retailer saw its shares suspended after shock profit warning over arithmetic mistake Conviviality, owner of the Bargain Booze and Wine Rack chains, is seeking to raise more than £50m in an emergency rights issue next week after a...
The Hindu Business Line  Mar 14  Comment 
Advanced Enzyme Technologies has completed the first tranche of additional investment of MYR 150,000 by way of subscription to the rights issue of 1.5 lakh equity shares having fac
The Economic Times  Mar 6  Comment 
Sompo holds 26 per cent in the general insurance joint venture.
Financial Times  Mar 2  Comment 
Barclays, JPMorgan and others share £31m in fees
Financial Times  Feb 27  Comment 
Sub-prime lender settles FCA probe into Vanquis Bank unit


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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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