A method of raising capital where existing shareholders are given the right to purchase additional shares at a discount to market price, typically in proportion to their current holdings. It allows current investors to maintain their ownership percentage.
From Old English 'riht' (just/proper) and 'offering' from Old English 'offrian.' This financing method developed in the early 20th century as a way to raise capital while respecting existing shareholders' preemptive rights.
Rights offerings often cause temporary stock price drops because they increase the supply of shares and are usually priced below market value. However, shareholders who exercise their rights typically break even or profit because they're buying below market price!
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