NISM Certifications · NISM-Series-XV: Research Analyst · Terminology in Equity and Debt Markets
What does a 'rights issue' of equity shares mean?
A rights issue is an offer of new shares to existing shareholders in proportion to the shares they already hold, normally at a stated issue price. It differs from a bonus issue, which is free, and from an IPO, which targets the public.
- AOffer of new shares to existing shareholders in proportion to their holdingsCorrect
- BFree distribution of shares out of reserves to existing shareholders
- COffer of shares to the general public through an IPO
- DBuyback of shares from existing shareholders at a premium
Explanation
A rights issue offers new shares to existing shareholders in proportion to their holdings, usually at a price set by the company. A free distribution from reserves is a bonus issue, a public offer is an IPO, and repurchase is a buyback.
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