For Woxa, our platform does not provide rights issue services. But we would like to present information about the Rights Issue in order to share knowledge about Corporate Actions.
What is the Rights Issue?
A rights issue or A rights offering is the issuance of additional shares to existing shareholders, typically at a lower price than the market price.
Why are rights offered?
The reason for offering rights is to raise funds. The company needs funds to expand its business or pay off existing debts and anything else. The company may offer rights to existing shareholders to benefit shareholders or use it as a way to avoid the time-consuming and expensive underwriting and release of additional shares to the public.
What are the types of Rights Issue?
There are two types of Right Issue: renounceable and non-renounceable.
Renounceable is a right that can be revoked (transferable) as follows:
- can be sacrificed.
- Can be traded on the stock exchange.
- Can allow that right to expire.
- Can sell additional stock rights to other investors.
- Can buy more rights through the stock exchange.
- Can request to buy additional rights from the company
Non-renounceable is a right that cannot be canceled (cannot be transferred) as follows:
- Cannot sell rights to anyone.
- Cannot trade You will have the choice to exercise your right to purchase more shares or let your right expire.
Advantages and Disadvantages of Rights Issue.
- Can raise additional funds. From the offering of new share rights to be used to expand the business or pay off existing debt.
- Can maintain relationships. Granting rights to existing shareholders helps maintain the relationship between the company and shareholders.
- There is no fee for underwriting new shares.
- The offering may result in a greater concentration of investors.
- Filing of documents related to rights offerings is expensive and time consuming.
- Some shareholders are not interested in purchasing new share rights, causing them to suspend their rights or sell their rights to others who are interested