Rights
Chapters in this video
- 0:00 Dilution and the preemptive right shield
- 1:36 How rights work: exercise, sell, or expire
- 2:35 Subscription price below market: the loyalty reward
- 3:15 The 30-45 day expiration clock
- 4:07 Cum rights versus ex-rights
- 4:40 Rights versus warrants: short and cheap, long and expensive
- 5:14 Rapid-fire exam recap
What this video covers
- What a preemptive right is, and why it exists to protect existing shareholders from dilution when new shares are issued
- How rights are issued proportional to current holdings, and the three choices shareholders have: exercise, sell, or let expire
- Why rights have intrinsic value and trade in the secondary market, with the subscription price set below current market price
- The difference between cum rights (rights attached to the stock) and ex-rights (rights trading separately), and what the ex-rights date means
- Why rights expire quickly, typically within 30 to 45 days, and what happens to shareholders who take no action
- How to distinguish rights from warrants on exam day: rights are short-term with a below-market exercise price, while warrants are long-term with an at- or above-market exercise price
Read the full lesson, free
This video's complete written lesson is free to read in the CertFuel app, no signup wall. The complete SIE course in the app is free too, including adaptive practice questions and spaced-repetition flashcards.