Right issue of shares: A conceptual framework

Abstract

A rights issue is a distribution of subscription rights to present stockholders to purchase more business securities. It is a non-dilutive pro rata method of raising money for equities in a publicly traded corporation. Rights issues are beneficial for all publicly traded companies as they reduce dilution and extend the useful lifetime of tax loss carry forwards. They can maintain tax loss carry-forwards more effectively through rights issues than through follow-on offering or other dilutive financing. Both private and public firms can issue securities through rights issues.