Difference Between Rights Issue and Private Placement
Differences between Rights Issue and Private Placement are explained in the below points,
- A right issue of shares (rights offering) is where a company provides an offer to their existing shareholders to purchase additional shares at a discounted price.
A private placement is where a company sells its stocks through a private offering. - Right Issues are only offered to the existing shareholders.
Private placements are only offered to a limited pool of accredited investors. - In a right issue, existing shareholders can subscribe to newly issued shares in proportion to their existing holdings.
In a private placement, accredited investors can buy the offered shares without any restriction of their existing holdings. - The company does offer the right issue of shares through a public offering in a rights issue.
The company does not offer its stocks through a public offering in a private placement. - In a rights issue, more regulated when compared to a private placement.
In a private placement, less regulated when compared to a rights offering. - The number of shareholders remains the same in the right issue.
The number of shareholders will be changed in the private placement. - In a rights issue, the stake of each shareholder in the company also remains the same (if the entire right offer is subscribed).
In a private placement, the stake of each shareholder will be different.
Difference Between Rights Issue and Private Placement
Please refer to the below table for the difference between rights issue and private placement,
| Rights Issue | Private Placement |
|---|---|
| A right issue of shares (rights offering) is where a company provides an offer to their existing shareholders to purchase additional shares at a discounted price. | A private placement is a fund-raising method where the stocks are sold through a private offering. |
| Right Issues are only offered to the existing shareholders. | Private placements are only offered to a limited pool of accredited investors. |
| Existing shareholders can subscribe to newly issued shares in proportion to their existing holdings. | Accredited investors can buy the offered shares without any restriction of their existing holdings. |
| In a rights issue, the company does offer the right issue of shares through a public offering. | In a private placement, the company does not offer their stocks through a public offering. |
| More regulated when compared to a private placement. | Less regulated when compared to a rights offering. |
| The number of shareholders remains the same. | The number of shareholders will be changed. |
| The stake of each shareholder in the company also remains the same (if the entire right offer is subscribed). | The stake of each shareholder will be different. |
Read more about Right Issue:
- What is the Right Issue of Shares?
- Why companies conduct the Right Issue of Shares?
- What is the benefit for the shareholders to subscribe to the Rights Issue of Shares?
- Why should a shareholder be careful about subscribing to a right issue?
- Benefit for the company to conduct the Right Issue of Shares?
- Rights Issue Example
- What is the Theoretical Ex-Rights Price (TERP) of a Share?
- What Happens to the Share Price after the Right Issue?
- Advantages and Disadvantages of Right Issue of Shares
Read more about Private Placement:
