- A company announces a Rights Issue to invite existing shareholders to buy more shares, usually at a discounted price. These shares are known as Rights Shares. After the Rights Issue is announced, the company then credits its existing shareholders’ Demat Accounts with REs (Rights Entitlements).
- These REs are not the Right Shares but the benefit given to existing shareholders to apply for the Right Shares. If shareholders do not wish to apply for these Rights Shares, they can even trade these REs in the market until a particular date.
- When you acquire or purchase Rights Entitlements (REs) and fail to apply for the rights share or trade them, the REs will expire, leading to the loss of their corresponding value.
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How do I apply for a Rights Issue?