An offering that allows an issuer’s existing shareholders to purchase a pro-rata amount of additional shares (also referred to as subscription warrants) of the issuer’s stock at a prespecified price per share (the subscription price). The subscription price is usually set at a discount to the latest trading price of the issuer’s stock. Public companies in need of additional capitalization offer non-issued, authorized stock by issuing rights to existing shareholders to purchase additional stock. Such valuable rights are subject to an expiration date after which they become ineffective and worthless. Some rights may be traded as a standalone security in the same market on which the stock trades before the specified expiration date of rights. Unsubscribed amounts of rights offerings will be underwritten by an issue manager (investment banker) as a primary offering to the public in a standby commitment.
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