A rights offering which doesn’t involve a backstop commitment party, or standby purchaser. Effectively, the issuer only sells the number of shares demanded by actual rights exercise. However, a directed rights offering is not as much costly as an insured rights offering (or standby rights offering) because there is no backstop commitment (normally, such a commitment has its own fees). The issuer bears the risk of an unsuccessful offering.
In other words, a partially subscribed direct rights offering may leave an issuer short of funds. However, a direct right offering can usually be concluded without shareholder approval, which is often a requirement under exchange listing rules for a backstopped rights offering whereby shares are issued in excess of 20 percent of the voting power or number of shares of common stock outstanding before the issuance.
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