Rights is an entitlement to buy underlying shares, corresponding to underlying stock.
Rights has similar pattern as ordinary share, with code, name and price.
General name rule of rights has name of underlying share plus “rights”.
Right issue is the entitlement of shares to subscribe under the offer according to position of equity holdings at the right issue price. Corporate will distribute the rights to all shareholders, Exchange will delivery it directly to shareholder’s account (physical stocks can be obtained after finish related procedure in registrar office).
Then share price of underlying stock will be adjusted, value of adjustment normally equals to value of distributed rights. Rights is divided into tradable and non-tradable, determined by issuing company.
Tradable rights: buy and sell is the same as common stocks, has price volatility, client who bought rights can subscribe for the right issue.
Non-tradable rights: client can choose whether subscribe the right issue or not, if choose not, the rights will be lapsed. Lifecycle of rights includes: listing date, last trading date, right issue deadline, delivery date of underlying shares.
Tradable rights generally has 5-7 trading days, can be traded from listing date to last trading date.
Right issue can be applied from listing date to right issue deadline.
Subscribed shares will be delivered on the stated delivery date. Tradable equity: sell, subscribe the right issue, laissez-faire
Non-tradable equity: subscribe the right issue, laissez-faire
Thus, client has limited choice, subscribe the right issue or laissez-faire, in the latter case, rights will be lapsed and client will lose this entitlement.