Most new issues of common stock are offered through a public offering. However, occasionally companies make a Right Issue that is restricted to existing shareholders. Each existing share receives one right, and a stated number of rights plus cash (subscription price) is needed to obtain one new share. The subscription price if3 set below the share's market price to ensure that the new issue is fully subscribed.



Only the existing shareholders have the right to buy the flew shares. In the United States and most major markets the right is detachable (can be sold separately to others), but in Indonesia the right is undetectable. It means that in order to get those privileges one has to buy the share before a stated date (ex--rights date).



Rights usually have short lives, up to one or two months, and may be traded prior to exercise. Up to a date specified by the company, existing shares trade cum-rights meaning the owner of the shares is entitled to receive the rights when issued. After this date the share trades ex-rights.



Research location: T Multifinas Perdana

Supervisor: Marita O' Sullivan, MBA

Accepted: [1990]