Rights offerings

A rights offering gives existing shareholders the right to buy new shares, usually at a discount to the market price or to NAV, in proportion to what they own (one new share for every three held, for example). Rights may be transferable — tradeable on the exchange — or not.

When new shares are sold below NAV, NAV per share falls for everyone; shareholders who do not participate are diluted. Sponsors argue the capital lets the fund take advantage of opportunities or spread fixed costs; critics note that fee revenue rises with assets. Read the prospectus supplement for the subscription price formula, the record and expiry dates, and any over-subscription privilege.