Rights Issues

Represents rights given to existing shareholders to purchase new issues of the company stock before it is offered to the public, so that existing stockholders can maintain proportionate ownership of the company, if desired.  The specified price at which shareholders are allowed to buy the new shares, referred to as the subscription price, is usually lower than the market price. A benefit for the company of selling to existing shareholders is that marketing costs will be less than selling to the general public. Rights issues serve to increase the number of shares outstanding and dilute earnings per share.