Rights offering is basically Companies way to raise more equity by issuing more shares from its treasury, whilst rewarding existing shareholders by offering them the ability to increase their shareholding by subscribing to more shares at a discount to market prices.
For example, just 5 days ago Raffles United Holdings announced a 1 for 1 rights issue at $0.05 per share. In this case and many cases there is no stock dilution to shareholders if company is releasing new shares either from its treasury or its owners breaking and releasing their own stake.
Share Price wise stock price might drop especially if rights issue is at a deep discount to the original share price. For eg. Cache Logistics Trust (SGX: K2LU) released their rights issue at a deep discount of $0.62 for 18 units every 100units owned when share prices were trading at $0.82. As a result the rights issue became heavily oversubscribed and the share prices dropped closer to the $0.62 trading range.
Rights offering is basically Companies way to raise more equity by issuing more shares from its treasury, whilst rewarding existing shareholders by offering them the ability to increase their shareholding by subscribing to more shares at a discount to market prices.
For example, just 5 days ago Raffles United Holdings announced a 1 for 1 rights issue at $0.05 per share. In this case and many cases there is no stock dilution to shareholders if company is releasing new shares either from its treasury or its owners breaking and releasing their own stake.
Share Price wise stock price might drop especially if rights issue is at a deep discount to the original share price. For eg. Cache Logistics Trust (SGX: K2LU) released their rights issue at a deep discount of $0.62 for 18 units every 100units owned when share prices were trading at $0.82. As a result the rights issue became heavily oversubscribed and the share prices dropped closer to the $0.62 trading range.