US rights offerings

Protect me from the market

May 01, 2009


Rights offerings have never been popular in the US. But now that they are the only option for some, both sides are arguing over legal protections should deals go wrong

Kyle Siskey
Americas staff writer

Rights offerings are taking the US by surprise. The volatile stock market and threat of shareholder litigation is making them the best option for many companies.

Traditionally, rights offerings (to shareholders) have been rarely used in the US because public offerings (to the general market) of stock have been so easy. And rights offerings require a 14-day period for shareholders to make their decision, like the pre-emption period in the UK, which causes uncertainty over price. The underwriting fees are also higher on rights offerings.

The few rights offerings that do happen in the US are from companies close to insolvency. They are desperate calls for help: invest in us or we're going under.

But in a distressed market like this, many big companies are finding that the waiting period and fees of a rights offering are preferable to the losses that could be suffered in...




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