Definition of Ex-Rights
What is Ex-Rights
Ex-rights is a term used to describe a situation in the stock market where a stock is trading without the right to participate in a new issue of shares. When a company decides to issue new shares, it typically offers those shares to its existing shareholders first, as a way to raise additional capital. This is called a rights issue, and it gives existing shareholders the right to purchase new shares in proportion to their existing holdings.
When a stock is trading ex-rights, it means that the right to participate in the new issue has been separated from the underlying stock, and the buyer of the stock does not have the right to participate in the new issue. This typically happens after the company has set a record date, after which anyone who buys the stock will not be entitled to participate in the rights issue. In financial publications, the abbreviation xr will appear next to a published stock price to indicate that the stock is ex-rights.
In practical terms, buying a stock ex-rights means that you are only buying the existing shares, without the right to participate in the new issue. Conversely, selling a stock ex-rights means that you are selling the existing shares without the right to participate in the new issue.
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