Rights issue

Yahoo  May 22  Comment 
Banca Monte dei Paschi di Siena (BMPS.MI) said on Friday it had signed an underwriting agreement with a pool of banks to subscribe to the lender's planned 3-billion-euro rights issue. The banks agreed to guarantee, severally but not jointly, the...
Financial Times  May 22  Comment 
Clusterstock  May 14  Comment 
New World Oil and Gas, the Jersey based exploration and development company with projects in Belize and Denmark, just called an emergency meeting with its shareholders after the company's stock rocketed then plunged because a British B&B owner's...
The Economic Times  May 12  Comment 
Sun Pharma Advanced Research Company was demerged from Sun Pharma as a pharma research and drug discovery company in 2007.
The Hindu Business Line  May 11  Comment 
The Board of Sun Pharma Advanced Research Company will meet on Tuesday to consider an issue of equity shares of ₹1 each by way of a rights issue. The board, however, will not decide on the...
The Hindu Business Line  May 10  Comment 
The bank whose logo is featured above is planning the country’s largest rights issue. Name the bank. Send in your response to blgofigure@gmail.com. One correct response received before Frida...
The Economic Times  May 8  Comment 
The stock closed the day with a gain of 5.18 per cent at Rs 513.50 on the BSE. During the day, it jumped 5.59 per cent to Rs 515.50.
The Hindu Business Line  May 8  Comment 
Stocks of auto major Tata Motors gained over 5 per cent today after the company raised Rs 9,040.56 crore from its rights issue. The stock rose by 4.86 per cent to Rs 511.95 on the BSE. At...
The Economic Times  May 7  Comment 
Tata Motors said its rights issue, which closed on May 2, was oversubscribed by 1.21 times and the company "collected" an amount of Rs 9,040.56 crore.
Financial Times  May 7  Comment 
Rights issue to bolster tier one capital ratio to allow Clydesdale and Yorkshire withdrawal
Reuters  May 6  Comment 
National Australia Bank, the country's top lender by assets, on Thursday said it plans to raise A$5.5 billion ($4.38 billion) in a rights issue as it looks to demerge and...


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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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