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Finance: What is a Rights Offering? 6 Views


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Description:

Rights offerings are essentially hostile takeover defenses. Unfortunately, they're not as cool as swords and shields.

Language:
English Language

Transcript

00:00

finance a la shmoop what is a rights offering all right people think a right

00:08

to buy and buy at a discount kind of companies may be fearful of a hostile [Woman pointing at woman behind reception desk]

00:15

takeover or some other big bad event that harms them and they want to give

00:19

existing shareholders preferential treatment over external non shareholders [Shareholders at a night club]

00:25

this rights offering is essentially a hostile takeover defense so they might [Bear attacking rights offering]

00:31

say ok pals for the next 60 days you have the right to buy an additional

00:34

share of our stock which is currently trading for 312 dollars each for $200 a [Man discussing company stock at presentation]

00:40

share and note the discount wink wink and you need to currently own 5 shares

00:44

for every one that you'll then buy sound like a plan well that is the company is [Man throws rights offering to woman]

00:50

offering those rights to buy at a discount and the shareholders can sell

00:54

those rights to other non shareholders for cash in essence is kind of a funky

00:59

one-time dividend that actually hurts both the would be external hostile [Metal anvil land on a bear]

01:03

takeover people but unfortunately also hurts the employees who have stock

01:07

options not actual shares so then they suffer the dilution of this rights [Anvil lands on employees]

01:12

offering with nothing to show for it yeah and you may ask is there such a

01:17

thing as a hostile take under mmm wondering about that [People protesting outside metal fence]

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