rights offering

A distribution of subscription rights to buy additional shares of a company that is made to existing shareholders, giving them priority in buying newly issued shares. With the issued rights, existing shareholders have the right, but not the obligation, to buy a specified number of shares at a given price within the subscription period. Although shareholders have a choice as to whether to exercise their rights, if they do not, their percentage ownership interest will be diluted. Often, the rights are transferable prior to expiration, meaning they can be sold on the secondary market, if a market develops.