When the rights are for equity securities, such as shares, in a public company, it can be a non-dilutive pro rata way to raise capital.
With the issued rights, existing security-holders have the privilege to buy a specified number of new securities from the issuer at a specified price within a subscription period.
Rights issues may be particularly useful for all publicly traded companies as opposed to other more dilutive financing options.
Subscription rights may be transferable, allowing the subscription-rightsholder to sell them on the open market.
Because the company receives shareholders' money in exchange for shares, a rights issue is a source of capital.
Underwriters and sub-underwriters may be financial institutions, stock-brokers, major shareholders of the company or other related or unrelated parties.
[1] Typically the number of over‐subscription shares that can be purchased by an investor is capped as no more than the amount of his/her basic subscription.
[1]: 1 Because rights offerings are unpopular, companies typically choose them as a last resort, perhaps due to insufficient investor demand.