Rights Offerings

Capital from the people who already believe in you

Most capital raises force a choice between the money you need and the shareholders you have. A discounted placement to outside institutions closes the funding gap, and hands your most loyal investors the bill, in the form of dilution they never had the chance to avoid.

There is an older, fairer answer, and it is the entire focus of our firm.

A subscription rights offering invites your existing shareholders to purchase new shares, typically at a discount to market, in proportion to what they already own. Every holder receives the same terms, the same price, and the same opportunity, from the largest institution on your register to the individual who bought a hundred shares a decade ago and never sold. Shareholders who participate maintain their ownership. No one is handed a preferential deal at their expense. It is, we believe, the most democratic transaction on Wall Street.

Why companies choose a rights offering

Fairness that builds loyalty.

Rewarding the investors who stayed (rather than diluting them for outsiders) strengthens the shareholder base you will rely on for every future vote, offering, and hard season.

Full participation, including oversubscription.

Well-structured offerings include an oversubscription privilege, allowing committed holders to purchase shares their neighbors decline. In our experience, shareholder demand routinely surprises management teams who were told “retail won’t show up.”

Tradable rights, real flexibility.

When structured as transferable, the rights themselves may be listed and traded during the subscription period. Holders who choose not to invest can sell their rights and capture value rather than letting them expire. Investors who want a larger position can buy additional rights in the market. And every holder can fine-tune their participation, exercising exactly the number of rights that fits their conviction and their budget. In an MMR offering, the subsequent Series A, B, and C rights may trade the same way, giving shareholders a liquid instrument at every stage of the program. Nothing is forced: shareholders choose to exercise, sell, or buy more.

Protection of valuable tax assets.

For companies carrying net operating loss carryforwards, a rights offering can raise substantial capital while avoiding the Section 382 ownership change that a placement to new 5% holders can trigger, preserving an asset that may be worth many millions.

Flexible structuring.

Rights offerings accommodate backstop commitments, warrants, and unit structures, and can be executed by NYSE, Nasdaq, and OTC-listed companies alike, including companies for whom conventional underwritten offerings are unavailable or punishingly priced.

A message to the market.

Asking your own shareholders first (and having them answer) is a public statement of confidence that no PIPE can match.