Rights Issue
An offer allowing existing shareholders to buy new shares at a discount before they are offered publicly.
What is Rights Issue?
A rights issue (also called a rights offering) is a method by which a listed company raises new capital by offering existing shareholders the right to buy additional shares at a discount to the current market price, in proportion to their existing holdings. Shareholders can exercise their rights (buy the new shares), sell the rights in the market, or let them expire. Rights issues dilute the share price but give existing investors the opportunity to maintain their proportional ownership. They are common when companies need to strengthen their balance sheet or fund acquisitions.
Example
A company with 100 million shares at $10 launches a 1-for-4 rights issue at $8 per share. Existing holders can buy one new share for every four held. Post-issue, the theoretical ex-rights price (TERP) is approximately $9.60.
Source: Investopedia — Rights Offering