What subscription rights mean for you as a shareholder
As a shareholder, subscription rights give you a concrete opportunity to keep your ownership stake by taking part in the share issue. If you do not want to or cannot take part, the rights can often be sold on during a limited period.
If the subscription rights are not used or sold, they lose their value when the subscription period expires, which makes the decision time-sensitive.
How subscription rights usually work
Subscription rights follow a clear and time-limited structure in connection with share issues.
- Subscription rights are allocated to existing shareholders
- The number is based on the current shareholding
- The rights can be used to subscribe for new shares
- They can often be sold or bought during a period
- The rights lapse after the end of the subscription period
Once you understand how the process works, it becomes easier to make the right decision based on your strategy and your interest as an owner.
When subscription rights become relevant
Worth bearing in mind
Subscription rights arise mainly in rights issues, where the company wants to give existing owners priority to the new shares. This creates a fairer arrangement in which owners can choose whether to take part, sell their rights or abstain completely.
For the company, subscription rights are a way of securing the capital raise while preserving the relationship with existing owners.
Frequently asked questions
What is the difference between a subscription right and a pre-emption right?
A subscription right is the actual security that gives the right to subscribe for shares, whereas a pre-emption right describes the principle behind the right.
Do I have to use my subscription rights?
No, but if you do not use or sell them, they lapse and become worthless.
Can subscription rights be sold?
Yes, in most share issues subscription rights can be traded during a limited period.
How do I know how many shares I can subscribe for?
It is set out in the terms of the issue and is based on how many subscription rights you have been allocated.
What happens if the issue is not fully subscribed?
Then the remaining shares may be allocated to other investors in accordance with the company's terms of the issue.