A rights issue is a way for a company to raise additional capital by offering its existing shareholders the right to purchase additional shares at a discounted price, in proportion to their existing holdings. Shareholders can choose to either buy the additional shares or sell their rights to other investors. A rights issue is often used by companies to fund expansion plans, pay down debt or acquire other companies. By offering the discounted shares to existing shareholders, a rights issue can be a more cost-effective way for a company to raise capital compared to selling new shares to the general public.