Right Issue

Right issues are the privilege given to the shareholder to acquire the additional shares directly from the issuing company. The additional shares are issued with the purpose for:

1. raising capital for expansion of business or repayment of loan facilities. 
2. giving the existing shareholders the opportunity to acquire additional shares, at a discount to the market price.

For example, the offer may be based on the right to buy one additional share for each ten shares held at usually lower than the current market price. With this, induces the shareholders to take up the right issue.

Rights are issued in the same way as dividends are paid.

The issuing company has books closing date which is the specified time and date set with the purpose of determining entitlement to the rights.  Anyone purchasing the shares on or after the ex-rights date is not entitle to receive any rights.

The rights received by the investors can be disposed in the market before its expiry. The expiry means the end of duration that the investors who received the rights can exercise to get the shares.

There are few options for investors when granted for the right issue:

1. exercise some or all of the rights
2. sell some or all the rights
3. buy additional rights for trading purposes or eventual exercise
4. do nothing and let the rights expire.

Written by: Abd Hadi Jusoh