Difference between a renounceable and non-renounceable rights issue

A rights issue is an issue of shares with the terms of issue giving existing shareholders the right to an additional number of shares in proportion to their current shareholding, i.e. the shares are offered on a pro rata basis.

For example, each shareholder may be entitled to one share for every two currently held.

Difference between a renounceable and non-renounceable rights issue.

Renounceable rights issue:

: existing shareholders may

–       accept the offer i.e. exercise the rights.

–       sell all or part of their rights to the new shares to another party.

–       do nothing i.e. reject the offer.

Non-renounceable rights issue

: existing shareholders may:

–       do nothing i.e. reject the offer.

–       accept the offer.