Module III· ECM — Follow-on, ABB, Rights IssueIntermediate
Question

Why is the subscription price in rights issues set at such a large discount, often 25%+?

Answer

The discount encourages shareholders to exercise rights and supports underwriting certainty. Because rights have value, the discount does not economically transfer value away from participating shareholders in the same way as a normal discounted placement. A deeper discount reduces execution risk but increases optical dilution for shareholders who do not participate.