Rights issues

What is a right issue and what impact will it have on my account?

What is a rights issue?

A rights issue is an issue of rights to a company's existing shareholders that entitles them to buy additional shares directly from the company in proportion to their existing holdings, often at a discount to the market price. Rights are often transferable, allowing the holder to sell them on the open market. You have 3 options when considering a rights offering:

  • Subscribe to the rights in full
  • Ignore the offer
  • Sell rights on the open market

How does it affect my account?

If you choose to subscribe you will be able to purchase additional shares, often at a discount.

Tax Implications:

The actual purchase of rights is not a tax event, however, as there is often a discounted price your overall cost basis may be altered. The sale of rights is a tax event and you will need to report this income as capital gains.