Subscription rights are entitlements issued by a company to its existing shareholders that allow them to buy newly issued shares at a fixed subscription price within a limited period. They are distributed in proportion to existing holdings and give practical effect to shareholders' pre-emption rights, letting each holder keep the same percentage of the company after the new issue. The rights are credited as a separate, temporary security with its own identifier through the rights allocation.
Because the subscription price is normally below the market price, the rights have value. In many markets they can be traded on the exchange from the ex-rights date until shortly before the offer closes. A holder may use them through a rights exercise, sell them, or let them lapse. They differ from warrants, which are longer-dated and often issued to new investors; see warrant exercise. The operational sequence is covered under rights issue processing.