What is a Rights Offering?

A Rights Offering is a way for a company to raise capital by giving existing shareholders the opportunity to purchase additional shares at a predetermined price, typically lower than the current market value. This approach is designed to help the company raise funds while providing its existing shareholders the chance to maintain their proportional ownership in the company. The discounted price incentivizes shareholders to participate, as it allows them to buy shares at a better rate than they would otherwise find on the open market.

This method is commonly used when a company needs to boost its capital for various reasons, such as expansion or to pay down debt. By offering these rights, the company can raise funds while also fostering shareholder loyalty, since existing investors can avoid dilution of their ownership stakes.