We’re the proud owner of 500 shares of stock for Botaniface, Inc., a company that manufactures and sells botanical anti-aging products. But, even though we like Botaniface, and even though the stock has been performing pretty well lately, we don’t necessarily want to buy any more shares right now. That’s why we were happy Botaniface issued a “renounceable right” this year, which is the option—but not the obligation—to buy additional shares at a discounted price.
The great thing about a renounceable right is that, not only do we not have to buy the shares if we don’t wanna, but we can sell the right to someone else. That way, even if we don’t exercise the right, we’re still not completely losing out on the deal.
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Finance: What is a Rights Offering?6 Views
finance a la shmoop what is a rights offering all right people think a right
to buy and buy at a discount kind of companies may be fearful of a hostile [Woman pointing at woman behind reception desk]
takeover or some other big bad event that harms them and they want to give
existing shareholders preferential treatment over external non shareholders [Shareholders at a night club]
this rights offering is essentially a hostile takeover defense so they might [Bear attacking rights offering]
say ok pals for the next 60 days you have the right to buy an additional
share of our stock which is currently trading for 312 dollars each for $200 a [Man discussing company stock at presentation]
share and note the discount wink wink and you need to currently own 5 shares
for every one that you'll then buy sound like a plan well that is the company is [Man throws rights offering to woman]
offering those rights to buy at a discount and the shareholders can sell
those rights to other non shareholders for cash in essence is kind of a funky
one-time dividend that actually hurts both the would be external hostile [Metal anvil land on a bear]
takeover people but unfortunately also hurts the employees who have stock
options not actual shares so then they suffer the dilution of this rights [Anvil lands on employees]
offering with nothing to show for it yeah and you may ask is there such a
thing as a hostile take under mmm wondering about that [People protesting outside metal fence]
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