Understanding Rights Offers

A rights offer, also known as a rights issue is a common corporate action. Corporate actions are events initiated by a publicly-traded company that have an impact on its shareholders. 

What are rights offers?

A rights offer is a way for a company to raise capital by offering its existing shareholders the opportunity to purchase additional shares at a discounted price. This allows shareholders to maintain their proportional ownership in a company and gives them the right, but not the obligation, to purchase the new shares.

The discounted price is usually lower than the prevailing market price, making the offer potentially attractive to existing shareholders. Rights offers are a common method for companies to raise funds for various purposes such as expansion, debt reduction, or acquisition financing.

The below options are available when considering a rights offer:

Take up the rights

If you would like to take a rights offer up you would take the following steps:

• Shareholders in the company that is offering the rights offer will receive an email from the EasyEquities corporate actions team. This will enable you to either accept or decline the offer. It will also contain information around the important dates relating to the offer that you need to be aware of. 
• You will notice that Letters of Allocation (LOA) appear in your EasyEquities account. This will give you an indication of what shares are available to you to convert, based on the ratio specified in the SENS announcement related to the rights offer. 
• If you accept the offer you will need to decide on the amount of rights you wish to take up. You would then use this to calculate how much you need to fund your account with in order for the transaction to go through. This is calculated by taking the subscription price and multiplying it by the amount of shares indicated to you in the LOA. The amount of rights you receive will be based on the amount you have funded your account with. 
• Once the rights offer goes through on the relevant date, your LOA will be removed from your account and the shares you have attained by means of the rights offer will appear with the rest of your shares in that company.

Decline the rights

If you are a qualifying participant of the rights offer, you can choose to reject the rights offer when you receive the relevant email from the EasyEquities corporate actions team. Your LOA shares will be sold at market value of the LOA on or before the last trading date specified for the LOA to trade on the exchange, if there’s a market available. Shares under LOA not sold or converted by the end of the period will be forfeited.

Trade your rights or buying more.

If you choose to, you can trade your rights by selling them during trading hours to other interested shareholders or buying more (excess rights).

This can only be done through the EasyEquities trading desk, who will sell your rights or buy more at the market price of the LOA. Not all rights offers come with excess rights.