Question

What is the meaning of right issue?

• A. Securities are not issued to existing shareholders at all
• B. Company offers new shares to its existing shareholders
• C. Company sells the securities to some selected institutions
• D. None of these

Answer 1

The correct option is B

Company offers new shares to its existing shareholders

A rights issue 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.