Rights issue

The Hindu Business Line  Jan 12  Comment 
The board of Orient Paper & Industries on Thursday approved the rights issue schedule. Accordingly, the issue will open for subscription on January 25 and close on February 2. The company had ea...
Financial Times  Jan 12  Comment 
€13bn rights issue overwhelmingly approved by the Italian bank’s shareholders
Euromoney  Jan 12  Comment 
UniCredit CEO Jean-Pierre Mustier has unveiled his new strategic plan for the bank. At its heart is a €13 billion rights issue. But look deeper and Mustier is at pains to stress UniCredit’s European, rather than Italian, credentials. He’ll...
Euromoney  Jan 12  Comment 
As EGM approves capital increase, lender spells out impact on regulatory capital if things go wrong.
MarketWatch  Jan 12  Comment 
The additional provisions for bad loans are part of a balance-sheet cleanup unveiled in December by the Italian bank, which also plans to launch a €13 billion rights issue by the end of March.
The Hindu Business Line  Jan 11  Comment 
The board of IP Rings on Wednesday approved the opening date of the proposed rights issue as January 23. The issue will close on February 6 and the last date for request for split application is Janua...
The Economic Times  Jan 10  Comment 
​The founders have stated in their petition that the proposed rights issue amounted to forcing the minority holders to buy shares, violating the terms of the shareholders agreement.
Reuters  Jan 4  Comment 
The Cariverona foundation has still not made up its mind whether it will underwrite the 13 billion euro ($13.6 billion) rights issue of Italy's UniCredit , a foundation source said on Wednesday.
The Hindu Business Line  Dec 20  Comment 
The board of directors of South Indian Bank will meet on Wednesday to consider a proposal to augment its paid-up capital through issue of equity shares on rights basis. Investors will closely moni...
The Hindu Business Line  Dec 15  Comment 
Karnataka Bank has mobilised ₹658.96 crore capital following a rights issue of shares. The bank had come out with a rights issue in the ratio of one share for every two shares held on the record dat...


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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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