A rights issue is an equity issue in which existing shareholders are allowed to subscribe for new shares based on, and in proportion to, the number of shares they already own, generally at a discount to the current market price.
There is no absolute limit on the size of rights issues, so they are the standard method of raising large amounts of equity in many countries.
Pricing and Structure of a Rights Issue
The shares in a rights issue are almost always priced at a significant discount to the market price of the existing shares. Discounts for traditional rights issues have typically ranged from 10% to 25%, but for ‘deep discount’ issues can be significantly greater (25% or more).