O'Reilly logo

An Introduction to Corporate Finance: Transactions and Techniques, Second Edition by Ross Geddes

Stay ahead with the world's most comprehensive technology and business learning platform.

With Safari, you learn the way you learn best. Get unlimited access to videos, live online training, learning paths, books, tutorials, and more.

Start Free Trial

No credit card required

Chapter 5
RIGHTS ISSUES/SECONDARY OFFERINGS
Corporate financiers also have a key role to play when companies need to raise equity capital in the years following flotation. Companies raise money in order to invest in new capital expenditures or projects, to make acquisitions of other companies, to repay debt or simply when the market is good and they can opportunistically raise funds. Such subsequent equity financing can also be called secondary offerings, making it sometimes confusing with the term ‘secondary offering’ referring to the sale of shares by existing owners. In America, subsequent equity issues are referred to as ‘seasoned’ equity offerings.
 
In the UK, almost all subsequent equity offerings are done by way of a rights offering. The financier will advise the company on the amount to raise, the pricing and market conditions. As in flotations, the corporate finance team is responsible for the documentation, discussions with the regulators and overall co-ordination of the transaction team (solicitors, PR, stockbrokers, accountants).
Figure 5.1 UK Rights Issues (1995-2004).
015
In a ‘rights offering’ (the term is used interchangeably with rights issue), all shareholders receive notification of the fundraising. If they wish to purchase the new shares, they do so (i.e., they exercise or take up their rights). If the shareholder does not wish to purchase the shares to which he ...

With Safari, you learn the way you learn best. Get unlimited access to videos, live online training, learning paths, books, interactive tutorials, and more.

Start Free Trial

No credit card required