What is right issue or RI?
A public company that wants to raise capital can opt for a Public Issue or a Rights Issue. Oftentimes they opt for latter, followed by former. In a rights issue, existing shareholders have the right to buy a specified number of new shares of the firm at a specified price within a specified time. Usually this price is below market price. The idea is to reward existing shareholders with an investment opportunity, which is perceived to be attractive. Long-term investors can purchase additional shares in right issue at lower than current market price and hold the stocks. From short-term investment prospective, one can sell the rights entitlement. Alternatively, the rights may be allowed to lapse. If a company is not in growth phase, rights issue tends to lower earnings per share and dividend yield. In such a scenario, offering rights (or public issue, for that matter) may not be a prudent course of action. Declaration date This is the date on which the board of directors announces to share
