What is a rights issue?

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A rights issue is an offer to the existing shareholders to purchase additional shares of the company at a discounted price. The rights issue is made in proportion to the existing holdings and is required to be subscribed within a specific period failing which the rights lapse.

Key features of a rights issue:

1. The rights issue is a primary market issue.
2. The offer is made to the existing shareholders and not to the general public.
3. It is the right of the shareholder and not an obligation to buy the additional shares.
4. The rights can be transferred or sold if the existing shareholder is not interested in accepting the offer.