Must Know Things before Investing In Rights Issue
Who Is Eligible?
The existing shareholders who are registered with the company on a given record date are eligible to but rights issue.
The record date is when the company announces that it will be offering the rights issue to all shareholders. The shares are known as cum-rights after the rights announcement but before the record date. Therefore, even if one does not hold shares currently but buy them at that time, will be eligible to receive rights issue.
How to Apply?
The shareholders can apply for rights issue through the rights application form and making the payment before the closing date for subscription, at the offer price.
How It Works?
A rights issue is directly offered to all shareholders of record or through broker dealers of record and may be exercised in full or partially. Subscription rights may either be transferable, allowing the subscription-rights holder to sell them privately, on the open market or not at all. A rights issue to shareholders is generally made as a tax-free dividend on a ratio basis. Because the company receives shareholders' money in exchange for shares, a rights issue is a source of capital in an organization.
