 | | When a company wants to raise funds by issuing additional securities, it may give its shareholders the opportunity, ahead of others, to buy the new securities in proportion to the number of shares each owns. The piece of paper evidencing this privilege is called a right. Because the additional stock is usually offered to shareholders below the current market price, rights ordinarily have a market value of their own and are actively traded. In most cases they must be exercised within a relatively short period of time. Failure to exercise or sell rights may result in actual loss to the holder. (See Para. 703.03.) |
