Rights Entitlement (RE) refers to the temporary and tradable instrument issued to existing shareholders when a company announces a rights issue. It represents the shareholder’s right to apply for additional shares at a predetermined price, usually at a discount to the current market price. These entitlements are credited to the demat account of eligible shareholders in proportion to their existing holdings on the record date.

Under a rights issue, companies raise capital by offering new shares to existing shareholders instead of the general public. The Rights Entitlement (RE) allows shareholders to either subscribe to the new shares, renounce (sell) their entitlements through the stock exchange, or let them lapse. Trading in REs usually happens for a limited period before the closure of the rights issue, providing flexibility to investors who may not wish to invest additional funds but still want to benefit from the offer.

Investors can view and trade REs on stock exchanges similar to equity shares, identified by a distinct symbol (e.g., “XYZ-RE”). However, purchasing REs does not automatically make an investor eligible for shares — the buyer must also apply for the rights shares within the issue period.

It’s important to note that REs carry market risk and can lose value if the rights issue is not subscribed to or if the market price falls below the issue price. Hence, investors should evaluate the company’s fundamentals, issue price, and market conditions before making decisions.

In summary, Rights Entitlements empower shareholders with the option to participate in a company’s growth, trade the benefit in the market, or renounce it — making it a crucial mechanism in equity financing and investor participation.