Investing term

What is Rights issue?

Existing holders receive the right to buy more shares at a discount, by a deadline.

A rights issue lets existing shareholders buy additional shares at a discount, in proportion to their holdings, by a deadline. The company raises capital while giving current owners first dibs to avoid dilution. You usually have a choice: buy the discounted shares, sell the rights, or let them lapse — and ignoring the notice means forfeiting the value entirely.

For example

You're offered the right to buy one new share at a 20% discount for every five you own — take it, sell the right, or lose it by the deadline.

Rights issue is taught hands-on in Stage 8 — Corporate Actions: What Lands in Your Account.

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Related terms

AcquisitionOne company buys another. The bought company's shares are converted to cash, acquirer stock, or a mix at the closing price.Carve-outA parent company sells part of a subsidiary in an IPO, keeping a stake.Corporate actionAny event initiated by a company that changes its securities or distributes value to holders.Cost basisWhat you originally paid for a holding, used to calculate gains and losses when you eventually sell.
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