Nil-paid rights

Nil-paid rights arise when a firm sells new shares for cash to existing shareholders via a rights issue. So, for example, a firm might offer one new share priced at, say, £1 for every four currently held. That’s called a ‘one for four’ issue. Let’s say the current share price is £2.50. So after the new share has been issued you would expect the firm’s shares to trade at around £2.20 (4 x £2.50 = £10. And (£10 + £1)/5 is £2.20). That’s called the ex-rights price.

Any shareholder can choose not to take up their rights, in which case they can often be sold. The ‘nil-paid’ price is the difference between the issue price and the expected ex-rights price. Here that’s £2.20 – £1 = £1.20. Another investor who was not invited to participate in the original rights issue might be interested in paying for nil-paid rights instead.

MoneyWeek magazine

Latest issue:

Magazine cover
Don't panic!

The Greek vote is a great opportunity to buy Europe

The UK's best-selling financial magazine. Take a FREE trial today.
Claim 4 FREE Issues

Paul Hodges: house prices could fall 50% in 'Great Unwinding'

Merryn Somerset Webb interviews Paul Hodges about deflation, the global economy's 'Great Unwinding', and how Britain's house prices could halve.


Which investment platform?

When it comes to buying shares and funds, there are several investment platforms and brokers to choose from. They all offer various fee structures to suit individual investing habits.
Find out which one is best for you.


30 January 1933: Adolf Hitler takes power

Adolf Hitler came to power on this day in 1933 following a political gamble that went disastrously wrong, and allowed the Nazi leader to call fresh elections.