Rights Issue

The company can issue more shares that will dilute the ownership interest represented by each of the existing shares.
This is assuming that the company has not issued all of its "authorised" shares already and that shareholders approve.
A company implementing a rights issue is offering additional and/or new shares but only to already existing shareholders.
The existing shareholders are given the right to purchase or receive these shares before they are offered to the public.
A rights issue regularly takes place in the form of a stock split, and can indicate that existing shareholders are being offered a chance to take advantage of a promising new development.


A firm may later decide to offer the existing shareholders the right to buy some new shares in proportion to the shares they already hold.
The new shares will be offered at a discount to the existing share, for example an offer of one new share at $90 may be made for every three existing shares whose market price is $110.
The discount is more apparent than real. The firm is regarded as having diluted the value of the issue by this offer of extra shares at a discount.




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