Rights Offering
Categories: Stocks, Derivatives, Trading
Think: "a right to buy." And buy at a discount.
Companies may be fearful of a hostile takeover or some other big bad event, and they want to give existing shareholders preferential treatment over external non-shareholders. So they might say, "Okay, pals, for the next 60 days, you have the right to buy an additional share of our stock which is currently trading for $312/share… for $300 a share (note the discount, wink wink) and you need to currently own 5 shares for every 1 that you'll then buy." That is, the company is offering those rights to buy at a discount—and the shareholders can sell those rights to other non-shareholders for cash.
In essence, it's kind of a funky, one-time dividend.
(See warrants, too.)