We are all familiar with Initial Public Offerings (“IPO”) because it is the normal route for a private company to ‘become listed’ in the stock market.

But what about existing listed companies which want to raise additional funds by issuing new shares?

There are usually 2 ways to do so – a private placement and rights issues. The former is typically catered for institutional/high net worth individuals through a private offering. On the other hand, a rights issue refers to an offer for existing shareholders to purchase additional shares at a (usually) discounted price.

For the sake of many retail investors who ‘sees stars’ when you see a document letter announcing a rights issue, fret not!

In this article, we will take a deep dive into the nuances of a rights offering using Watches.com Ltd (SGX: WVJ) as an example.

Why do companies issue rights?

Before we even go into the details, we need to understand the rationale of the rights issues.