Corporate actions
Rights issue
An offer letting existing shareholders buy new shares at a discount, in proportion to their holding.
How it works
Rights protect existing holders from dilution by giving them first refusal. Take up the rights in full and your percentage ownership is unchanged.
Rights are usually tradeable, so a shareholder who does not want to invest more can sell them and capture some of the value.
Where it misleads people
Ignoring a rights issue is the expensive option: you are diluted and receive nothing for it. Rights that lapse unexercised are simply value given away.
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