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Last week a funny thing popped up in my little "play" brokerage account (where I own <100 shares of some stocks that trade below $5.00). A second line appeared below one of my stocks with a funny name and no listed value:

enter image description here

I had no clue what this was or meant (and still don't) but a couple days later a package arrived in the mail with a prospectus about this. It is called a subscription rights offering. The language of the prospectus might as well be Aramaic. I've tried, but I don't understand it. I also don't understand why the listed subscription price in the prospectus ($0.62) is higher than the market value (as you can see above). Have I won the right to purchase stock at a higher price than the general population??

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After a company goes public, if it wants to raise more money, then it does this by secondary public offering or rights issue.

In subscription rights issue gives the right to existing share holders to buy new shares at equal proportion. So if every one buys, they maintain the same percentage of ownership. Generally the pricing is at discount to current market price. Not sure why the price is high, unless the price for this stock fell sharply recently.

  • I believe it did just fall below 0.62 within the last 8 days. After the date of the offering. So the next question would be, do companies normally amend the offering to reflect market value? Otherwise it would be useless. – WakeDemons3 Oct 30 '17 at 12:33
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    @WakeDemons3 it depends on what the company believes, if it believes the drop is temporary, it may go ahead with the offer, else revise it else scrap the offer – Dheer Oct 30 '17 at 15:00
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    Small companies quite often sell large blocks of shares at above market value, as the low liquidity in the market isn't a good representation of the 'true' price of large blocks of shares. See more in depth answer/discussion here: money.stackexchange.com/questions/72406/… – Philip Oct 31 '17 at 9:17

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