What is a Rights Offering?
When a company intends to issue new shares of stock to the public, it may opt for a rights offering. This provides existing shareholders with the opportunity to purchase new shares at a discounted price before they become accessible to the general public. Shareholders have the choice to buy additional shares according to their preference, but they must do so before the rights expire.
Why do companies use Rights Issues?
Companies use rights issues to raise money for various reasons, such as expanding their business, paying off debts, and funding acquisitions. Even investors who are not shareholders can buy these rights on the market.
What are the different types of Rights Issues? 🧐
There are two types of rights issues: tradable and non-tradable.
Tradable rights issue: Shareholders can buy new shares at a discounted price. If they don't choose to exercise their rights, the rights will be sold, and the proceeds will be added to their Trading 212 account.
Non-tradable rights issue: Shareholders can still subscribe to the newly issued shares, but the rights will expire if they choose not to participate.
How to participate in a Rights Issue?
If you meet the eligibility criteria to participate in a rights issue, you will receive an email containing the offer details and the required capital. If you have sufficient available funds, you can apply and expect to receive the newly issued shares within a timeframe of 10 days to a month, depending on the specific structure of the issue. The newly allocated shares will be automatically credited to your account, while the necessary funds will be held in reserve until the pay date.