Purchasing “Rights Issue” Enables Subscription in Capital Increase, but Does Not Mean Ownership of Shares

​The Capital Market Authority urges traders dealing with the financial market to read and understand the new tradable rights framework, which enables right entitlements of listed companies undergoing rights issues, to list and trade rights issue of listed companies as a security in the market.  This mechanism is characterized by compensating shareholders for the decline in the value of their investment portfolio. This would be the result of amending the share price after the approval of the company’s extraordinary assembly to increase its capital. The compensation would be by depositing the rights issue as securities in the portfolios of the registered investors by the end of the extraordinary assembly day. The rights issue value would be equivalent to the decrease in the value of their shares. It is important to know that these rights would not appear as values in the portfolio but as numbers.

The mechanism also gives shareholders the choice to sell all their rights issue, subscribe in all of it, or sell some of the rights to get the needed liquidity to subscribe in the remaining rights. In addition, the mechanism compensates those who didn’t exercise their right to subscribe, promotes transparency in share prices, and helps our market to be in line with other global financial markets.

It is important to know all the details on listing and trading rights issue, how it operates, and to understand the factors affecting it to ensure that an investment decision is based on knowledge.