We use cookies to improve security, personalize the user experience,
enhance our marketing activities (including cooperating with our marketing partners) and for other
business use.
Click "here" to read our Cookie Policy.
By clicking "Accept" you agree to the use of cookies. Read less
Rights Offering: A Comprehensive Guide to Shareholder Rights
Definition & Meaning
A rights offering is a method used by companies to provide their existing shareholders with the opportunity to purchase additional shares of stock at a specified price, typically lower than the current market value. This process allows shareholders to buy a proportional number of new shares within a designated time frame. Rights offerings are often transferable, meaning shareholders can sell their rights on the open market if they choose not to participate.
Table of content
Legal Use & context
Rights offerings are primarily utilized in corporate finance and securities law. They are relevant in situations where a company seeks to raise capital while giving its current shareholders the first chance to maintain their ownership percentage. This can involve various legal documents and procedures, which users may manage with the help of legal templates available through platforms like US Legal Forms.
Key legal elements
Real-world examples
Here are a couple of examples of abatement:
(hypothetical example) A tech company decides to raise funds for expansion. It issues a rights offering allowing its shareholders to buy one additional share for every five shares they already own at a price of $10 per share, while the current market price is $15. Shareholders can choose to buy their shares, sell their rights, or let them expire.
Comparison with related terms
Term
Definition
Key Differences
Rights Offering
Opportunity for existing shareholders to buy additional shares at a discount.
Exclusive to current shareholders; typically involves a fixed price and timeframe.
Public Offering
Sale of shares to the general public.
Available to anyone, not just existing shareholders; usually involves more regulatory scrutiny.
Private Placement
Sale of shares to a select group of investors.
Not available to the public; often involves fewer regulations and disclosures.
Common misunderstandings
What to do if this term applies to you
If you are a shareholder receiving a rights offering, consider your options carefully. You can choose to purchase additional shares, sell your rights, or let them expire. If you need assistance, explore US Legal Forms for templates that can help you navigate the process. If your situation is complex, consulting a legal professional may be beneficial.
Find the legal form that fits your case
Browse our library of 85,000+ state-specific legal templates.