Companies requiring additional capital may offer shares for sale to their shareholders in proportion to their existing holdings, usually at a discount to the price in the market.
Such issues initially gives existing shareholders securities called rights. Shareholders get the right to purchase new shares at a discount to the market price on a stated future date.
Rights usually, have value, the difference between the current share price and the exercise price. Until the date at which the new shares are to be purchased, shareholders can trade the rights, similar to the trading of shares. Rights may be listed on a stock exchange, in many cases, they are not, but stockbrokers can usually arrange for sale and purchase of them, nevertheless.
Rights can be renounceable or not and that is determined by the company’s shareholders usually at a general meeting. If they are non-renounceable then shareholders will not be able to transfer the rights to a third party if they do not intend to exercise them.