Ex-rights is a term used to refer to the sale of shares of stock with no rights attached, in contrast with cum rights, where the shares are sold with rights. Ex-rights shares are worth less because they do not carry the benefits associated with rights, like being able to buy shares in a new issue at a discounted price. There are a number of ways a share may be stripped of the associated rights.
One common reason for a share to be ex-rights is because the rights have already been exercised. If a person buys a share with rights and hangs onto it until a new issue, the shareholder can exercise the rights to pick up new shares cheaply. The rights associated with the original share or shares have been used, and are no longer associated with those shares. If the shareholder chooses to sell those shares, the buyer will not receive any rights with them.
Rights can also be structured to expire. If people do not exercise their rights before the expiry date, their shares will become ex-rights shares. People may also have the option of transferring rights if they don't want to or cannot use them before the expiry date. In this case, the shareholder retains the share and sells just the rights to another party. If that share is sold in the future, it will be an ex-rights share, with no benefits beyond the intrinsic benefits of stock ownership. Transfers are not always an option and people interested in being able to sell the rights linked with cum rights shares should see if they are renounceable or not at the time of purchase.
In the terms of sale, information will be provided about whether rights are associated with a share or shares, what those rights are, and whether they are transferable. This information should be carefully reviewed and if a buyer has any questions, a personal finance consultant or broker can be queried for more information about the purchase.
Buyers looking for stock prize cum rights shares more highly, as in addition to getting the value of the stock, they also get a chance to get in early on a new offering. These shares can sell at a premium as buyers and sellers alike are well aware of their increased value. Traders holding cum rights shares can also make decisions about selling the rights separately from the shares, creating another avenue for profiting off their shares.