Open Offer & Rights Issue - Difference

What is the difference between Open Offer & Rights Issue?

Many people don’t know the basic difference between Open Offer & Rights Issue. Let us today discuss the basic difference between Open Offer & Rights Issue.

I have taken the definitions of both of these terms from Wikipedia & Investopedia.

What is Open Offer? -

A secondary market offering that is similar to a rights issue in which a shareholder is given the opportunity to purchase stock at a price that is lower than the current market price. The purpose of such an offer is to raise cash for the company.

An open offer differs from a rights issue in that investors are unable to sell the stocks that they purchase under the open offer to other parties. Some investors see a secondary market offering as bad news because it causes stock dilution and may signal that the stock is overvalued

What is Rights Issue? -

Under a secondary market offering or seasoned equity offering of shares to raise money, a company can opt for a rights issue to raise capital. The rights issue is a special form of shelf offering or shelf registration. With the issued rights, existing shareholders have the privilege to buy a specified number of new shares from the firm at a specified price within a specified time. A rights issue is in contrast to an initial public offering (primary market offering), where shares are issued to the general public through market exchanges.

Issuing rights to a company's existing shareholders to buy a proportional number of additional securities at a given price (usually at a discount) within a fixed period.

Rights are often transferable, allowing the holder to sell them on the open market