1.1.12.5 Rights / Warrants

Rights offerings allow existing shareholders to purchase (or subscribe to) additional shares of stock at a discount from the public offering price when the company prepares to issue new shares. These shares, which are also called subscription rights, are transferable securities. The existing investors have the option to allow the rights to expire, renounce (where they sell the rights offer to another person) or exercise the options.

A warrant, attached to another security, entitles the holder to convert the security into common stock or some other instrument at a set price during a specified period. The price set in the warrant is usually lower than the current market value of the common stock.These offerings give existing shareholders another opportunity to purchase additional shares at a discount from the market price.