Author: OurCrowd

Rights Offerings A Rights Offering is an issuance of ‘Rights’ to a company’s existing shareholders that allows them to purchase additional shares from the company in proportion to their ownership, within a fixed time period. In a Rights Offering, the issue price of each share is generally at a discount to the current market price. The Good Companies will often seek a Rights Offering when they need to raise money quickly (for example, to service a debt covenant, pursue an aggressive acquisition or for general working capital requirements). From a company’s perspective, Rights Offerings are typically much quicker to close than a new equity issuance, and are much cheaper to execute. From an investor’s perspective, the subscription price of a Rights Offering is often-times at a significant discount to the company’s stock price, as it needs to be attractive enough to encourage all investors – including early investors –  to participate with their prorata amount of the raise. The Bad Issuing stock at discounted valuations carries the risk of signaling a distressed cry to the market. Not only is the offering’s share price discounted, but by...