Fundamental Glossary / Shareholding & Ownership
Rights Issue
An offer of new shares to existing shareholders in proportion to their holding, usually at a discount to the market price.
Formula
Rights ratio, for example 1 new share for every 5 held, at a stated price. Shareholders can subscribe, sell the entitlement where it is renounceable, or let it lapse.
What it means
A rights issue raises equity from the current owners first, so they can avoid dilution by paying their share.
The ex-rights price is a weighted blend of the old price and the rights price. The discount is not a gift if you have to pay it to stand still.
How to read it
Subscribe if you want to keep your percentage and the new capital will earn its keep. Selling the right recovers part of the dilution in cash. Doing nothing is the worst of the listed choices when rights have value.
What to watch
A deep-discount rights issue that repairs a weak balance sheet still dilutes the claim on future earnings. Price the use of funds, not the headline discount.
This note explains the term. It is not a research recommendation, a target price, or a comment on any security. Ratios and regulatory thresholds change; use the latest filing or circular for a live figure.