Listen to a Business English Dialogue about Subscription right
Clarence: Hey Kennedy, have you heard about subscription rights?
Kennedy: Hi Clarence! Yes, subscription rights give existing shareholders the option to buy additional shares of a company’s stock before they’re offered to the public.
Clarence: That’s right, Kennedy. It’s a way for companies to raise capital from existing shareholders before seeking funds from new investors.
Kennedy: Exactly, Clarence. Subscription rights are often issued as a form of incentive to encourage shareholders to maintain their ownership stake in the company.
Clarence: Right, Kennedy. Shareholders can exercise their subscription rights by purchasing additional shares at a predetermined price, usually at a discount to the market price.
Kennedy: Absolutely, Clarence. It’s a way for companies to reward loyalty and provide existing shareholders with an opportunity to increase their investment in the company.
Clarence: Indeed, Kennedy. Subscription rights are typically offered for a limited time period, allowing shareholders to decide whether or not to take advantage of the opportunity.
Kennedy: That’s correct, Clarence. Shareholders who choose not to exercise their subscription rights may have the option to sell or transfer them to other investors.
Clarence: Right, Kennedy. And for companies, issuing subscription rights can be a cost-effective way to raise capital without the need for external financing.
Kennedy: Absolutely, Clarence. It’s a strategic tool that companies can use to strengthen their balance sheets and support future growth initiatives.
Clarence: Indeed, Kennedy. By offering subscription rights, companies can tap into their existing shareholder base for funding, which can be particularly beneficial during times of economic uncertainty.
Kennedy: That’s correct, Clarence. It’s a mechanism that allows companies to maintain shareholder loyalty while also meeting their capital needs in a flexible and efficient manner.
Clarence: Right, Kennedy. Overall, subscription rights play an important role in corporate finance, providing both companies and shareholders with opportunities for value creation and growth.