What is not right about rights shares

Money that should have gone to the corporate coffers is going to the shareholders’ pockets.

There are many sources of funding available for a public company. It can tap into retained earnings. It can issue shares in the secondary market, or issue debt or take on bank loans. If it is adopting the secondary route, management will try to price the shares as expensive as possible, but not prohibitively so. If it is borrowing money, the goal will be to negotiate as favourable terms as possible, including low rates. Companies can also avail themselves of rights shares. In Nepal, where the history of the capital market is young, companies often issue a rights offering to raise additional capital. Shareholders adore these, as they benefit at the cost of companies issuing these shares.