An offer of new shares or other securities made to existing shareholders in proportion to their shareholdings. A rights issue is usually to be subscribed in cash (nearly always at a discount to the market price).

The right to subscribe for the new shares or securities can be traded in the market nil paid. Arrangements are normally made through underwriters for the sale of shares not taken up by shareholders (known as the rump). In the first instance underwriters will attempt to sell the rights not taken up through the market. Any that remain unsold (known as the stick) will be taken up by the underwriters. So even if a shareholder does nothing (a so-called lazy shareholder), they may still receive a cash payment if the shares that were provisionally allotted to them are sold in the market for more than their subscription price.

For further information, see Practice note, Rights issues: overview.

For summaries of rights issues in the What's Market database, see Practice note, What's Market, Secondary issues: Rights issues.