When a company offers existing shareholders the opportunity to increase their holding in a company through buying additional (or new) shares at a set price within a set time period.
If you’re an eligible shareholder, you’re entitled to apply for new shares based on the number of shares you owned on the record date. For example: a company might say you can buy one new share for every four shares you already hold.
Participation in rights offers is completely optional! If you don't participate, your percentage ownership in the company may get diluted.
Share purchase plans
When a company offers existing shareholders (who own at least one full share) the opportunity to increase their holding in a company through buying additional (or new) shares at a set price within a set time period.
Unlike a rights offer, your application isn’t limited by the number of shares you currently hold. Share purchase plans are usually capped at a maximum investment amount per shareholder (for example, $50,000). Maximum amounts are set by the company, and is announced when the offer opens.
If a share purchase plan is oversubscribed, it may be scaled back. This means you get fewer shares than what you applied for. Any money not invested will be returned to your Sharesies Wallet as soon as possible.
When a company gives a select group of investors the opportunity to buy new shares at a set price, as a way to raise capital (cash). Often, you don’t need to be an existing shareholder to participate in a share placement, but this isn’t always the case—it’s up to the company as to who participates.
Share placements can happen when companies need to raise capital beyond their existing shareholder base. Share placements can decrease your percentage ownership in that particular company.
The company might offer existing shareholders the opportunity to take part in a rights offer or share placement plan in addition to a share placement; these other types of corporate actions help existing shareholders maintain their ownership in the company.