A rights issue occurs when a company allows its existing shareholders to purchase additional shares at a reduced price. Typically, the discounted price is only valid for a limited time before returning to normal.
In order to raise capital, a company would issue rights. If current shareholders choose to purchase additional shares, a company could use the funds to pay off debt, acquire assets, or facilitate expansion without having to take out a bank loan.

A rights issue is a corporate fundraising strategy in which a company offers new shares to its existing shareholders before making them available more broadly. These shares are typically offered at a discounted price compared with the prevailing market value. The number of shares each investor can purchase usually depends on their existing ownership. For example, shareholders might be given the right to buy one additional share for every ten shares they already hold.

Companies may launch rights issues to raise money for expansion, repay borrowings, finance acquisitions, improve cash flow, or strengthen their balance sheets. Shareholders are normally given a specific period to decide whether to exercise their rights. Depending on the issue terms, the rights may also be transferable or tradable.

Participating can help investors maintain their percentage ownership of the company. However, shareholders who decline the offer may face ownership dilution because the company increases its total number of outstanding shares.