open offer

An offer of new shares usually at a discount to existing shareholders on a pre-emptive basis, similar to a rights issue. The usual practice is to invite shareholders to apply for any number of shares. Unlike a rights issue, application forms are used (instead of provisional allotment letters) which cannot be traded nil paid and no arrangements are made for the sale of shares not taken up by shareholders. The principle of pre-emption (right of preemption) is usually achieved by providing for a guaranteed "minimum entitlement". If any shareholder declines his minimal entitlement, the excess shares are allocated to those applying for shares in excess of their minimum entitlements. If excess applications cannot be met in full, applications are scaled down.