A corporate transaction in which a listed company issues new shares to raise capital, granting its current shareholders the pre-emptive right to buy them in a set proportion and at a price fixed at a discount to the market, before offering them to the general public.
The right, share and subscription price create an observable parity, but deadlines, costs, liquidity and dilution determine the executable return.
Live deals are shown with your account, according to your plan.
The mechanics, step by step.
Step 1
The company announces the offering and sets a subscription price at a discount to the market.
Step 2
Each share receives rights that trade on the exchange during the subscription period, usually about two weeks.
4 rights plus €5.00 subscribe 1 new share. Before the offering the stock trades at €10.00.
If the right trades below €1.00 because retail dumps it, subscribing is cheaper than buying the share.
Hypothetical figures to explain the mechanics. Not a real case and not a recommendation.
Step 3
Many retail holders sell their rights without looking at the price, so the right trades below its theoretical value.
Step 4
Buying cheap rights and subscribing delivers new shares below market; borrowed shares hedge the position until delivery.