A broad definition
RIGHTS ISSUES AND OPEN OFFERS
Companies seeking to raise more money may decide to approach their existing shareholders via a rights issue. The name comes from the fact that these shareholders have a legal right to decide whether they want to participate ahead of anyone else. As a shareholder your basic choices are;
· Take up the offer and buy more shares
· Allow the offer to lapse
· See on your rights “nil paid”
Rights shares are usually issued at a discount to the current share price to attract interest. So sometimes a shareholder can raise some cash by selling on their right to new shares. Where this option is not made available the event is usually referred to as an open offer.