This is where a company that is already listed on a public market makes a fresh issue of shares in a bid to raise more finance from its shareholders.
The term comes from the fact that in the UK an existing shareholder has a pre-emptive right to buy any new shares that are offered before other investors. This right may be taken up or sold on “nil paid”. Rights shares are usually offered at a discount to the current market price to make them more attractive. The whole issue may be underwritten by a bank as a safeguard against low public demand for the shares.