What is a rights issue?
A rights issue occurs when a publicly traded company offers its existing shareholders the opportunity to purchase additional shares, typically at a specified price and in proportion with current holdings. Shareholders who choose not to participate may see their percentage of ownership in the company decrease.
What are rights?
Rights are entitlements granted to existing shareholders that allow them to purchase additional shares of underlying stock at a specified subscription price. Rights are generally exercisable for a limited period of time and expire if they are not exercised. Rights typically have their own security identifier, name and market price.
How rights are distributed
The company distributes rights to eligible shareholders based on their existing holdings. Rights are credited directly to the shareholder account by the applicable depository or transfer agent.
When the rights are distributed, the price of the underlying stock generally adjusts to reflect the value of the rights.
Eligibility: Shareholders must generally own the underlying stock before the ex-rights date to receive the rights. Shareholders who purchase the stock on or after the ex-rights date will not receive the rights associated with the distribution. Investors who are not eligible for the initial distribution may be able to purchase the rights in the open market of the rights are transferable and publicly traded.
Tradable vs. non-tradable rights
Whether rights are tradable or non-tradable is determined by Rights offering.
Tradable rights: Maybe bought or or sold in t he open market during the applicable trading period. Investors who purchase rights in the market may also be eligible to exercise the rights to purchase shares, subject to the terms of the offering.
Non-tradable rights: Cannot be bought or sold in the open market. Eligible shareholders may exercise the rights to purchase additional shares or allow the rights to expire. Rights that are not exercised by the expiration date generally expire without value.
Rights lifecycle
Key dates in the lifecycle of rights include: listing date, last trading date, subscription deadline, and underlying share delivery date.
Tradable rights are typically active for only 5–7 trading days. Trading is available between the listing date and the last trading date (Longbridge generally closes trading 2 days before the last trading date). Subscriptions can be submitted between the listing date and the subscription deadline. Shares purchased through the subscription will be credited to your holdings on the underlying share delivery date.
How rights are handled
Tradable rights: You may sell them, subscribe for shares, or let them expire.
Non-tradable rights: You may subscribe for shares or let them expire.
If you take no action, the rights will expire automatically and the asset value will be lost.
How to exercise your rights
Subscribing in a rights issue means purchasing a corresponding number of underlying shares at the subscription price, based on the number of rights held and the subscription ratio set for that issue. Within 2–3 days of the rights being distributed, the rights issue details will appear in the Longbridge app for you to submit your subscription.
You can only have one active subscription submitted per rights issue at a time — however, you may withdraw your submission and resubmit a new one at any time before the deadline.
Before the exercise period begins, Longbridge will notify all clients holding rights via in-app system messages and email.
To subscribe: Longbridge app → Assets → All Features → Rights Issue Offers → select the relevant rights and submit your application.
Note that not all rights issue actions will trigger an email notification (this applies to rights purchased on the open market rather than received through distribution). Please check the Rights Issue Offers page proactively for available entries and their corresponding deadlines. Longbridge’s subscription deadline is typically 2 business days earlier than the publicly announced deadline, as this allows time to consolidate and submit results to the exchange. Please refer to the deadline shown in the Longbridge app.
Oversubscription
Some rights offerings allow eligible shareholders to request additional shares beyond the number they are entitled to purchase through their basic subscription privilege.
Oversubscription requests are generally filled only if shares remain available to fulfill all oversubscription requests. The additional shares may be allocated on a pro rata basis or otherwise specified by the terms of the offering.
Example: A shareholder receives rights to purchase 1,000 shares and requests an additional 10,000 shares through the oversubscription privilege. Depending on the availability of share and the terms of the offering, the shareholders may receive:
- Only 1,000 shares from their basic subscription
- The 1,000 shares plus a portion of the additional shares requested ; or
- The 1,000 shares plus 10,000 additional shares requested