In Financial terms what is a rights issue?

Answer 1

When doing a Secondary Market Offering of shares to raise money, a company can opt to do a rights issue to raise equity. With the issued rights, existing shareholders have the privilege to buy a specified number of new shares from the firm at a specified attractive price within a specified time.

Rights can be renounceable(can be sold separately from the share to other investors during the life of the right) or non-renounceable (shareholders must either take up the rights or let them lapse. Once the rights have lapsed, they no longer exist).

To issue rights the financial manager has to role baithke:

Subscription price per new share
number of new shares to be sold
the value of rights
the effect of rights on the value of the current share
the effect of rights to existing and new shareholders
A right to a share, generally issued on ratio basis( e.g one-for-three rights issue). Because the company is getting the shareholders' money in exchange for issuing rights, a rights issue is a source of funds for the company issuing it.

Answer 2

A company wishing to raise capital issues gives existing shareholders the right to purchase additional shares at a small discount.
Rights issues are of the form one new share for a fixed number of shares held. eg one 'right' for each five shares held.
A shareholder may either take up the rights by buying the shares or sell the on the stock market. If the rights price is too high, many shareholders will sell their rights, depressing the share price.
As most shareholders will not be entitled to an exact number of rights, the odd amounts are sold off and the cash is credited to the shareholder. eg a shareholder with 100 shares who receives a one for seven rights issue has an entitlement to 14 2/7 shares. He will actually receive rights to 14 shares and be credited with the sale proceeds of the 2/7, described as 'sale of fractions'.

Answer 3

Rights? What do you mean? If you are talking about a relationship between money & human rights, its this, the rich exploit the poor, this of course is a wrong that has been going on far too long. Money should not afford some rights and privilages at the expense of other peoples rights.
Too few people in the world controle far too much money.