How it works
Existing shareholders receive subscription rights in proportion to the number of shares they hold, and can acquire new shares by paying the exercise price. Shareholders who do not wish to participate can simply not exercise the rights, and in some structures may instead sell the rights themselves on the market. Offerings are broadly divided into "committed" types, where a securities firm underwrites the issuance, and "non-committed" types, where there is no such underwriting.
What to keep in mind
A key feature of a rights offering is that existing shareholders receive rights fairly in proportion to their holdings, but shareholders who do not exercise their rights will experience dilution of their ownership stake. It is also worth noting that in a non-committed offering, there is a possibility that the funds sought will not be fully raised as planned.