Placing of new shares or securities e.g. convertible bonds to potential investors and raise capital
A rights issue is directly offered to all shareholders of record or through broker dealers of record and may be exercised in full or partially. Subscription rights may either be transferable, allowing the subscription-right-holder to sell them privately, on the open market or not at all. A right issuance to shareholders is generally issued as a tax-free dividend on a ratio basis. Because the company receives shareholders' money in exchange for shares, a rights issue is a source of capital.
Rights issues are more common as they are just as effective in raising money for the listed company, but more convenient for those shareholders who do not wish to increase their shareholding, as they can simply sell the rights.
An open offer is similar to a rights issue, in that shareholders are entitled to buy newly issued shares, normally at a price lower than the current market price, in proportion to their existing holdings. Unlike a rights issue, an open offer does not allow shareholders to sell the right to subscribe to shares X the shareholders have an entitlement rather than a tradeable right to subscribe to new shares.
Any entitlement that is not taken up is simply allowed to lapse, or the shares are sold to another party with no compensation to the original shareholder for the loss in value of their holding that results from the dilution the new issue causes.