Moneyzine
Contents
/Investment Guides /Stock Rights

Stock Rights

Moneyzine Editor
Author: 
Moneyzine Editor
2 mins
September 21st, 2023
Advertiser Disclosure

Definition

The term stock rights refers to the privilege granted to existing shareholders to receive additional shares of common stock when a new issue is offered to the marketplace. Generally, a stock right allows the shareholder to receive the additional shares of stock in the same proportion as their existing holdings.

A stock warrant is the document that outlines the rights provided to stockholders, including the number of shares that can be purchased as well as the purchase price.

Explanation

Companies will issue additional shares of common stock into the marketplace to raise capital. A rights issue provides existing shareholders with the opportunity to maintain their proportional ownership in a company by allowing them to receive additional shares of a new issue of common stock in the same proportion as their existing holdings. For example, if a new issue of stock increases the number of shares outstanding by 10%, a shareholder holding 100 shares of stock will have the right to purchase 10 shares of the new issue.

A stock warrant is the document that outlines the rights granted to each shareholder. The information found on the warrant would include the number of shares that can be purchased, the price per share, as well as the date the right expires. An investor has three options when granted stock rights:

  • Purchase Shares: the shareholder can elect to exercise their right and buy additional shares of stock.

  • Sell the Rights: if the warrant price is lower than the current market price per share, the stock rights have value. When this occurs, the shareholder can sell the stock rights to another investor for profit.

  • Do Nothing: finally, the shareholder can allow the rights to expire without buying additional shares or selling the rights.

Once the rights issue is announced, a share is not separable from the rights, and the new shares of stock are known as rights-on. Once the warrant is received, both the shares of stock and the rights can be sold separately. When a share of stock is sold separately from its rights, it is termed ex-rights.

Related Terms

common stock, employee stock purchase plans, stock compensation plans, stock option plans, stock grants, Section 83(b) election, common stock equivalent, contingent issuance agreement, appreciation and phantom rights, stock warrants

Explore Investing Further

Trading has never been easier, thanks to the rise of online platforms that enable you to buy and sell various assets at the click of a button. But with so many options available, it can be challenging to decide which platform is right for you.
Looking for a way to avoid swap fees while trading forex?
Below listed are the small reviews of the top 10 ETF brokers available across the United States.
Our top beginner's pick for copy trading is eToro. Read on for more details, plus seven good alternatives.
Swing trading stocks can be a great way for investors to take advantage of short-term stock market movements and gain significant returns. If you're interested in swing trading, the key to success lies in selecting the right stocks to buy and sell quickly for a profit.
The table below lists the best stock picks under $2, listed on public exchanges.
The table below lists the best stock picks under $1, listed both on public and OTC exchanges.
This section will highlight the best EV-trading penny stocks available in the United States.
The demand for sustainable energy has grown rapidly in recent years. This has resulted in increased scrutiny of the automotive market. As a result, the electric vehicle (EV) industry has made significant advancements.
Intelligent Bio Solutions Inc. is a life sciences company, founded in 2016 with headquarters in New York and is engaged in performing diagnostic tests, real-time monitoring, and non-invasive surgery for its patients. The firm has developed a CoV-2 Biosensor, which can be used in RNA virus detection.
Hour Loop was founded in 2013 with headquarters in Redmond, Washington. It’s an online retailer involved in e-commerce in the United States that hit the public markets on Jan 7th of 2022. The company sells home/garden decor, electronic products, kitchenware, and apparel through walmart.com, amazon.com, and hourloop.com.

Related Content

Biden Or Trump: Who Is Better For The Economy And Stocks?
Yup. This is one of those articles. It's an election year, and here in the U.S., we get to decide which old dude who’s been alive long enough to remember when there were only 48 states in the U.S. will be the leader of the free world.
March 19th, 2024
When it comes to strategic business planning, accounting is front and center, shaping the course of action. At least it should be.
March 14th, 2024
DRIP Brokers: Best Brokers for Dividend Investing for March 2024
Reinvesting dividends could mean compound growth for your portfolio. But reinvesting them manually can be a hassle. This is why you could benefit from a dividend reinvestment plan (DRIP).
March 12th, 2024
How To Invest in Real Estate Without Becoming a Landlord
We all know that in order to build wealth and prepare for retirement, investing is the key. However, it can be hard to figure out what to invest in and how to put your money to good use. One of the most talked about ways to build wealth is owning property and being a landlord to bring in passive income. But what if you don’t want to do that? You can still invest in real estate!
March 6th, 2024
Investing In Nature: The Closest You'll Get To Your Money Growing On Trees
ESG (Environmental, Social, and Governance) has become a polluted word for many traders and investors - but that doesn't mean it's going completely away. Nor does that mean you can't profit from nature or sustainable practices. But there are some opportunities in the regenerative ag, conservation, and green real estate spaces.
February 29th, 2024

Contributors

Moneyzine 2024. All Rights Reserved.