Rights issue

The Hindu Business Line  Mar 24  Comment 
The rights issue of Kingfa Science & Technology will open for subscription on Monday. The company is offering 19,99,893 shares to eligible shareholders at ₹750 apiece. The entitlement ratio is...
MarketWatch  Mar 23  Comment 
Shares of Credit Suisse Group AG fell 2% in Zurich on Thursday after media reports the Swiss banking giant is considering a share sale to boost its capital buffers. Bloomberg said the company may issues shares representing 10% of its outstanding...
The Hindu Business Line  Mar 20  Comment 
To mop up ₹300 cr; sets record date as March 31
Financial Times  Mar 17  Comment 
Africa-focused oil company announces rights issue to strengthen balance sheet
newratings.com  Mar 17  Comment 
LONDON (dpa-AFX) - Tullow Oil plc (TLW.L) said that it intends to raise about 607 million pounds by way of a Rights Issue, consisting of the issue of 466.93 million New Ordinary Shares in aggregate at an issue price of 130 pence per New Ordinary...
New York Times  Mar 13  Comment 
The investigator’s remarks essentially expanded the assassination of the estranged older sibling of North Korea’s leader, Kim Jong-un, into a human rights issue.
Mondo Visione  Mar 13  Comment 
Singapore Exchange (SGX) is enabling companies to seek a general mandate for an issue of pro-rata renounceable rights shares of up to 100% of the share capital from 50% previously. The enhanced rights issue limit is aimed at helping companies...
newratings.com  Mar 10  Comment 
LONDON (dpa-AFX) - Real estate investment trust Segro Plc. (SGRO.L) on Friday said it has acquired the 50 percent interest in the Airport Property Partnership or APP joint venture it does not already own from the Aviva Group Entities. SEGRO has...
The Hindu Business Line  Mar 9  Comment 
Indian Commodity Exchange (ICEX) today said it expects to restart operations by the end of this month after meeting the Rs 100-crore networth requirement post rights issue. The exchange, where trad...
Flightglobal  Mar 8  Comment 
Korean Air s W457 billion ($399 million) rights issue closed with only 96.4% of the 22 million shares offered taken up.


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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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