Rights issue: what are your choices if you already own the shares?
When a company announces a rights issue, you have a decision to make about the shares you already own. How much would you need to pay for the new shares? Could you sell your rights instead? What happens if you do nothing?
A rights issue offers eligible existing shareholders the chance to buy new shares, usually in proportion to what they hold. The rights may themselves be tradable. To assess the discounted subscription price, you need the full terms: the company will have more shares outstanding, and its share price normally adjusts when the rights detach.
Reviewed 27 September 2026
Read the terms before you compare prices
Find the issuer's announcement and prospectus. Write down the entitlement ratio, subscription price, ex-rights date, dealing and acceptance deadlines, and what happens if you do nothing. Check the treatment of fractions and the rules for your particular account or depositary receipt. A broker's operational deadline can be earlier than the issuer's.
The proceeds deserve equal attention. Is the company funding expansion, repairing a stretched balance sheet, or meeting an urgent cash need? Read the financing plan and the financial statements together. A rights issue can strengthen a business, but it also asks current owners to commit more capital or accept a smaller percentage holding.
A real 2024 example: National Grid
On 23 May 2024, National Grid announced a seven-for-24 rights issue at 645 pence per new ordinary share. It sought about £7.000 billion gross to help fund a much larger UK and US energy-network investment programme. The issue closed in June 2024.
Imagine you held 24 qualifying ordinary shares at the relevant record date. The terms gave you rights to subscribe for seven new shares. Exercising all seven would have cost 7 × £6.45 = £45.15, excluding any account charges. You would then have held 31 ordinary shares and committed another £45.15. Assessing that extra investment means looking at what the company planned to do with the money.
The announcement specified 1,085.449 million new ordinary shares. After completion, the half-year report recorded £6,839.000 million of net proceeds. This was the amount left after expenses.
What can you do with a right?
Depending on the terms and your broker, the choices commonly include subscribing for the new shares, selling transferable rights during their dealing period, or allowing the rights to lapse. Some offers have a sale-of-lapsed-rights or rump process; do not assume it will protect you or return a particular amount. Read the specific prospectus and your broker's corporate-action message.
If other holders take up new shares and you do not, your share count stays the same while the company's total share count rises. Your percentage ownership falls. If rights can be sold, their value may offset some of that economic effect, but prices and costs vary. Exercising requires extra cash that you could otherwise use elsewhere. Your choice depends on those costs, the offer terms and whether you want to commit more money to the company.
For a US-listed depositary receipt, confirm how the depositary handles rights. The ordinary-share ratio, jurisdictional restrictions and deposit agreement can change what an ADR holder can actually do. National Grid's SEC filing covers the UK corporate action for the US-listed issuer. ADR holders needed to check the rights and deadlines applicable to their own holdings.
Check the business case after the offer closes
An issue can solve a financing problem without proving the funded projects will earn enough. Keep two dated notes: what management said the money would fund, and what later reports show about capital spending, debt, cash flow and returns. Compare per-share figures using the company's restated history where relevant. National Grid's later results say prior EPS comparatives were adjusted for the bonus element of its rights issue; an unadjusted before-and-after EPS comparison would mislead.
Helmbeam can help you follow the company's reported Numbers and revisit it as the investment programme develops. Use the prospectus and your broker's corporate-action message to check your rights and submit your election. For the wider funding picture, use our share-dilution checks and company-debt guide.
Sources
4 referencesFrequently asked questions
Does a rights issue mean my existing shares are worthless?
No. It increases the shares outstanding and may change the value represented by each share, but the outcome depends on the issue terms, the rights' value and what the company achieves with the cash. Read the issuer's documents before drawing a conclusion.
What happens if I do nothing?
That depends on the offer and your broker. Rights may lapse or be handled through a specified sale process. Your percentage ownership will usually shrink if new shares are issued and you keep only your old shares. Check the exact corporate-action notice and deadline.
Is the discounted subscription price a guaranteed profit?
No. The market price can adjust when the rights detach and can move further before or after the offer closes. The subscription price cannot be evaluated without the entitlement ratio, share price, funding purpose and your additional cash outlay.
Helmbeam is a research and analysis tool operated by Scydex Ltd. Scydex Ltd is not authorised or regulated by the Financial Conduct Authority. Helmbeam does not provide investment advice, recommendations, or solicitations to buy or sell securities. All data is for informational purposes only. Past performance of any signal, cohort, or classification does not guarantee future results. All investing involves risk, including loss of principal. Always conduct your own research and consult a qualified financial adviser before making investment decisions.
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