Meaning
A Rights Issue is a method companies use to raise fresh capital from their existing shareholders.
Core Concept
It allows current shareholders to purchase new shares, usually at a discounted price, in proportion to their existing stake.
Purpose and Mechanics
Companies issue these to fund growth, expansion, or reduce debt. Shareholders receive “rights” to subscribe to these new shares within a specific timeframe.
Shareholder Impact
If not exercised, existing shares can face dilution. However, it offers shareholders an opportunity to increase their ownership at a favorable price.
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