What is a rights offering for a closed-end fund?
A closed-end mutual fund usually sells shares to the public only once, shortly before it begins trading on an exchange. If the fund wants to raise additional capital, it can make a rights offering, which gives current shareholders the right to purchase additional shares — usually below the market price. Making a rights offering is a costly way for a closed-end fund to raise additional capital, but it s less expensive than holding an additional public offering. The value of existing shares is diluted to the extent that shareholders are able to buy additional shares below market price.
