Rights issue means the?

A. issue of shares to the directors of a company.
B. issue of shares by a company only to the founders of the company
C. right of shareholders to vote on any issue
D. issue of shares to shareholders on favorable terms

Correct Answer:

Option B – issue of shares by a company only to the founders of the company

Explanation

A rights issue or rights offer is a dividend of subscription rights to buy additional securities in a company made to the company’s existing security holders. When the rights are for equity securities, such as shares, in a public company, it is a non-dilutive pro rata way to raise capital. Rights issues are typically sold via a prospectus or prospectus supplement. A rights issue is when a company issues its existing shareholders a right to buy additional shares in the company. The company will offer the shareholder a specific number of shares at a specific price.