An invitation to existing shareholders to acquire additional shares in the company. The right will be, e.g. one new share for each two shares previously held. The price is usually lower than it would be in the open market and the shareholder can normally sell the right to buy to a third party, thus making a profit for himself. From the point of view of the company it is an easy way of raising new capital.
|Reference: The Penguin Business Dictionary, 3rd edt.|