Subscription Price

Well, in the old days, you’d actually subscribe to these things. They were called "magazines," and they came on this stuff, called "paper." And there were tons of them. On gardening. Or celebrities. Or current events. Or lifestyles. There was a set price. If you wanted a year of these things, you paid it.

Well, the term relates in all things finance as well. In this sense, a subscription agreement applies directly to a new issue of shares from a company that's raising money to, you know…pay off their new fleet of corporate jets. Or to open up China as a new market. Or for that pesky lawsuit they got hit with for their product that apparently sticks to certain types of skin.

So, in this type of offering, offered pre-emptively to already-existing-holders of shares, a subscription agreement outlines the terms at which current investors can invest in the new offering. Like...if you already own 100 shares of SnailCo (the shipping company that vows to send your packages “slowly and carefully”), and they’re trading at, say, 80 bucks each, then that company might have a rights offering in which current shareholders get the right to buy new shares at, say, 77 bucks each.

That $77 price is fixed as the subscription price, i.e., buyers of the incremental sale of securities get the right to pay 77 bucks for them, and they usually come at a discount to the current market price, so as to kinda-sorta semi-guarantee that the full allotment of shares that the company wants to sell...will actually be sold. Even if they are sold very, very slowly.