Rights issue

A rights issue is one of the ways in which listed companies raise new money via the stock market. It gives investors who already hold shares in the company the right – but not the obligation – to buy additional shares in a fixed proportion to their existing holding. The new shares are usually priced at a discount to the current market value of the company’s shares in order to encourage investors to take up the offer.

As the new shares come directly from the company, they are free of both stamp duty and brokers commission. Shareholders who do not want to take up their rights to buy the discounted shares may sell them as ‘nil paid rights’ – either back to the company, which will then pay them the difference between the discounted sale price and the market price on the issue day, or through their broker.

The discount on new shares bought at a rights issue does not necessarily mean that they are cheap, as the new shares will ‘dilute’ the old: the market price of existing shares will fall to reflect the lower price of the new, so a large part of the ‘gain’ on the new shares will be cancelled out.

66% off newsstand price

12 issues (and much more) for just £12

That’s right. We’ll give you 12 issues of MoneyWeek magazine, complete access to our exclusive web articles, our latest wealth building reports and videos as well as our subscriber-only email… for just £12.

That’s just £1 per week for Britain’s best-selling financial magazine.

Click here to take advantage of our offer

Britain is leaving the European Union. Donald Trump is reducing America’s role in global markets. Both will have profound consequences for you as an investor.

MoneyWeek analyses the critical issues facing British investors on a weekly basis. And, unlike other publications, we provide you with the solutions to help you turn a situation to your financial advantage.

Take up our offer today, and we’ll send you three of our most important investment reports:

All three of these reports are yours when you take up our 12 issues for £12 offer today.

MoneyWeek has been advising private British investors on what to do with their money since 2000. Our calls over that period have enabled our readers to both make and save a great deal of money – hence our position as the UK’s most-trusted investment publication.

Click here to subscribe for just £12