### Examples of Rights Issue

Rights issue is an issue of additional shares by a company to raise capital for expansion or to solve a liquidity problem. With the issued rights, existing shareholders have the privilege to buy new shares of a company in proportion to their existing holding, and at a discounted price.

Example 1:
MAA Company has 400,000 \$1 ordinary shares as at 30 June 2011. The company decided to make a rights issue to its existing shareholders by offering 1 new share for every 4 shares held, at \$1.20 each.
Therefore, with 400,000 shares, the rights issue = 400,000 / 4 = 100,000 shares.
The amount received from the issue = 100,000 shares * \$1.20 = \$120,000.

Example 2:
Golden plc had the following information:
Authorized Capital 5,000,000 \$0.50 ordinary shares
Issued Capital 3,000,000 \$0.50 ordinary shares
The company decided to make a rights issue of two ordinary shares for every fifteen ordinary shares held at a premium of \$0.15 each.
Therefore,
with 3,000,000 shares issued, the rights issue = 3,000,000 * (2/15) = 400,000 shares
The amount received from the issue = 400,000 shares * (\$0.50 + 0.15) = \$260,000.

* Next: Bonus Issue vs Right Issue