What does a Rights Offering allow existing shareholders to do?

A Rights Offering is a mechanism that allows existing shareholders to purchase additional shares of stock directly from the company, usually at a price lower than the current market value. This offering is made available proportionally based on their current ownership, ensuring that existing shareholders have the opportunity to maintain their ownership percentage and avoid dilution of their shares.

Choosing to buy new shares at a discount is a fundamental aspect of the Rights Offering, as it makes the opportunity attractive to shareholders who want to increase their investment in the company at a favorable price. This option typically requires shareholders to take action, such as exercising their rights, within a specified time frame.

The other options do not accurately represent the nature of a Rights Offering. For example, selling shares back to the company, requesting additional shares without cost, or exchanging shares for convertible securities are not characteristics associated with this type of offering. These other scenarios pertain to different forms of reorganizations or transactions that do not align with the functional purpose of a Rights Offering.