Subscription right: what is it, and how does it work?

Subscription right is a term already known in the market. In practice, it allows investors to maintain the same level of shareholding in a company at the time of a new share offering. 

If you invest in variable income, it is likely that at some point you will come across the term “Underwriting right”.

This can be an interesting opportunity to increase your earnings. Therefore, it is important to understand: what are subscription rights and how do they work? How can you exercise them?

To find these and other answers, just continue reading the text. 

See this content:

  • What are subscription rights:
  • How subscription rights work:
  • How to exercise rights:
  • What are leftover subscriptions:
  • What are the advantages of subscription rights; 
  • Subscription rights in Real Estate Funds. 

What are subscription rights?

Subscription rights occur when a company decides to put more shares up for sale on the Stock Exchange as, by law, it is obliged to give preference to purchase these new shares to its current investors.

The subscription right is important so that investors can maintain the same level of participation in the company.

For example: if a company has a total of 100 shares on the Stock Exchange and you have two of them, you have a 2% stake. If the company decided to put another 100 shares for sale on the market, its shares would represent 1% of the total. 

With the subscription right, you would have the right to buy two of these new shares. So, after buying, your stake in the company would remain 2%. 

Subscription right is one of several terms that are part of the daily life of those who invest in the Stock Exchange. Understanding these concepts is fundamental to perceiving opportunities, dominating this market and getting closer to good returns. 

How do subscription rights work?

When a company decides to increase its capital, it can issue new shares on the Stock Exchange. In this situation, the company’s shareholders have preference to buy the assets of the new batch. 

Current investors then receive all the information necessary to exercise this right, if they wish. The information is these: 

  • Date of issuance of new shares.
  • Deadline for the purchase of new shares.
  • Percentage that the shareholder is entitled to subscribe.
  • Stock price.
  • Date for trading the right on the Stock Exchange (if the right is negotiable).
  • Deadline for exercising subscription rights.

If you want to exercise the subscription right, the investor needs to show interest within the stipulated dates , as we will explain below. 

If you do not want to exercise your rights, you can sell them on the Exchange . For this, you can also talk to one of our Advisors. 

If you don’t use your subscription rights or sell them, no problem. Your rights will expire once you pass the deadline informed by the company.

In addition to the ease of contacting the Advisory team via WhatsApp, here at Toro you can invest without having to pay a brokerage fee and have access to the simplest way to invest in the Stock Exchange. 

What are leftover subscriptions?

When investors do not show interest in buying or trading subscription rights, the shares that were not purchased are called subscription leftovers. 

They are then offered again to shareholders. It is important for you to know that you can only purchase leftovers if you have exercised your subscription right at the first moment. 

This is a good opportunity, since you can, in addition to maintaining your percentage of participation in the company, increase it. Do you want to understand more about the details of the Stock Exchange? Here at Toro you will find content, materials, courses and articles to learn the best practices for investing in this market. 

What are the advantages of exercising your subscription right?

Using your subscription right can be advantageous to you for several reasons. First, it is important to know that asset prices at the time of subscription are different.

Most of the time,  the share price is lower than the market value. In that case, you can buy shares at a cheaper price and sell them later.

If you don’t want to transfer more resources, you can also trade the shares you already have in your portfolio and buy the new shares for subscription rights. Thus, you receive a percentage of profit for the difference in prices. 

Furthermore, it may be interesting for you, as a shareholder, to maintain your stake in the business. If you do not exercise your rights, your participation will be diluted. 

Not to mention, with more stocks in your portfolio, you can receive more dividends and increase your earning potential by harnessing the power of compound interest.


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