Rights Offering: How a Closed-End Fund Offer Works and Why the Discount Often Vanishes

By Stock Titan Editorial Team Published November 8, 2026, 06:56 AM EST · Updated November 8, 2026, 07:13 AM EST

Show the data

Category	Value
Market formula (92.5% of five-day average)	$17.90
Price set (floor at 92.5% of asset value)	$19.28
Closing price on October 15	$19.33

What is a rights offering?

A closed-end fund is a pool of stocks, bonds or loans whose shares trade on an exchange like any stock. Unlike an ordinary mutual fund, it does not create new shares every day for anyone who sends money. So when its manager wants more money to invest, it has to sell new shares in a formal offer.

The law makes the rights offering the natural route. Under Section 23(b) of the Investment Company Act, a closed-end fund may not sell common shares below the value of what it owns per share. One of the exceptions is an offering to its own holders. A rights offering uses that exception. That is why a fund can sell new shares this way below that value.

Operating companies use rights offerings too, and our guide to stock offerings covers the other kinds of sale. This guide follows the fund version, which has its own price rules.

How does a rights offering work for a closed-end fund?

The abrdn Global Infrastructure Income Fund (ASGI) ran a typical offering in the fall of 2026. Its announcement of September 11 gave every holder on the September 21 record date one right per share. Three rights bought one new share, and the offer closed at 5:00 p.m. on October 15.

The rights were transferable, which means they could be sold. They had their own ticker, ASGI RT, and traded on the New York Stock Exchange until October 14. Some funds issue non-transferable rights, which can only be used or left to expire. Total Return Securities Fund (SWZ) did that in December 2025. The Cornerstone funds' 2026 filings describe the same kind.

The ratio is not random. The fund's prospectus supplement is the detailed offer document it filed with the SEC. It lists the rules SEC staff set for a sale of tradable rights priced below asset value with no shareholder vote. One of them is that it takes at least three rights to buy one new share. That caps how many new shares a single offer can add.

How is the rights offering price set?

Two prices matter for any fund. The market price is what its shares trade for. The net asset value, or NAV, is what the fund owns minus what it owes, per share. Fund shares often trade below their NAV. That gap is called a discount to NAV. Some funds price an offer above NAV instead. The Cornerstone funds' August 2026 filings set their planned offers at 104% of NAV.

ASGI's formula was typical. The price would be 92.5% of the average closing price over the last five trading days. If that came out below 92.5% of NAV on the last day, the NAV figure became the price. Holders paid an estimated $19.47 a share up front. That figure came from mid-September prices.

By October 15 the market price had slipped. The formula pointed to $17.90. The NAV floor was higher, and the final price came in at $19.28. That was 5 cents under the day's close of $19.33.

Why can a rights offering cost more than buying shares on the market?

Twenty closed-end fund rights offerings ended in the year to November 7, 2026, each with its own terms and results releases. Two of them used no market formula. Total Return Securities Fund (SWZ) priced at a set share of NAV, and Gabelli Equity Trust (GAB) set a fixed price. The other 18 paired a market formula with a NAV floor, both stated in their terms. In all 18, the floor set the final price. Every results release but ASGI's says so in words such as "equal to 90% of the Fund's net asset value," and ASGI's numbers show it.

The market part of each formula took 5% or 7.5% off the recent average price. The floor set the final price instead, and on the last day it sat a median 0.4% below the fund's closing price, the last trade of the day.

In 4 cases it sat above the close, so a holder who exercised paid more than the exchange price that day. The widest gap came at NXG NextGen Infrastructure Income Fund (NXG), whose final price was 2% over its close on April 30, 2026.

Show the data

Part	Value	Squares
Above the close	4	4
Up to 1% below the close	10	10
1% to 4% below the close	5	5
11% below (fixed price)	1	1

The reason is the gap between price and value. Most of these funds closed their offers at roughly 7% to 10% below NAV. At discounts that deep, the floors in these offers (86% to 98.5% of NAV) sat above the market formula, so the floor set the price.

The funds say this in their own filings. ASGI's prospectus warns that if the formula falls under the floor, the price "will likely be greater than the market price." It adds that in that case, or when the formula price itself tops the market price, "the Rights will have no value, and a person who exercises Rights will experience an immediate loss of value." The one wide discount to the market price in the year came from a different design. Gabelli set a fixed $5.00 price in advance, 11% under its $5.63 close on the last day. The table below names every fund, with a link to its results release.

Does a rights offering dilute your shares?

Ownership dilution comes from the share count. ASGI's offer added about 3.58 million new shares, so the fund ended with about 11% more shares. A holder who sat out kept the same shares in a bigger pool.

NAV dilution hits everyone. Each new share sold below NAV, and each dollar of offering costs, pulls the value per share down. ASGI's prospectus estimated a drop of $0.62 a share, or 2.93%, if every right were used. It said holders would feel it "even if they fully exercise their Rights," and that it falls hardest on those who do not.

Who pays the costs varies. At ASGI the fund paid the dealer fee, the charge of the bank that markets the offer, and the other expenses, so every holder shared them. At BlackRock Capital Allocation Term Trust (BCAT), the adviser paid all of them.

ASGI's advisers said the new money would let the fund add investments without selling existing positions, a view its board weighed. Advisers also have a stake. ASGI's filing put its advisers' extra yearly fees at about $2.57 million if the offer filled, and called that "an inherent conflict of interest."

Selling transferable rights can make up for part of the dilution, which is the point of making them tradable. When the price ends near the market price, though, a right is worth little. Our share count and dilution guide explains the ownership math in more detail.

What is the oversubscription privilege?

The rules in ASGI's prospectus are typical. Only record date holders who exercised all their rights can ask, and rights bought in the market do not count. Holders pay for the extra shares up front, and any money not used comes back. Some boards can add shares on top. Nuveen Real Asset Income and Growth Fund (JRI) added 1,750,000 shares in March 2026, and requests still ran higher.

Demand varies a great deal. Gabelli's fixed-price offer drew requests for 175% of its shares, and most of the shares it issued went to holders asking for extra.

ASGI's offer went the other way. It offered about 10.5 million new shares, and holders took about 3.58 million, about a third. Of the 20 offerings, 8 results releases called the offer over-subscribed.

How to exercise rights through a broker, and the deadlines

ASGI's prospectus spells out the path. Holders whose shares sit with a broker "must contact that nominee to exercise their Rights." The broker sends the election to the fund's agent, often with a notice of guaranteed delivery, a broker's promise that the paperwork will follow. That notice and the payment must arrive by 5:00 p.m. New York time on the last day.

That is the fund agent's deadline, and a broker often sets an earlier one of its own. RiverNorth/DoubleLine Strategic Opportunity Fund (OPP) told its holders in November 2025 that brokers may stop taking instructions 1 to 3 business days before the end. Interactive Brokers, for one, asks for instructions by noon New York time on the day before an offer ends. That rule covers every market but the Australian, British and Canadian ones, which it lists on their own. It handles later ones only on a "best-efforts" basis.

You pay the estimated price when you elect, for your basic shares and any extra shares you ask for. After the close, a confirmation shows the final price and any refund or extra amount due. Once the agent has your payment, the order is irrevocable, meaning it cannot be cancelled, even if the market price later drops below what you paid.

The full cost of exercising goes beyond the price per share. ASGI's prospectus says holders pay any broker fees for buying, selling or exercising rights, and tells them to ask about those fees first. Brokers price corporate actions a holder chooses to join in different ways. Schwab's pricing guide lists no charge for them. E*TRADE lists $38 and refunds it for some account types. A fixed fee like that weighs most on a small order. On the 100 new ASGI shares in the example above, it would add about 2% to the cost. Neither page names rights, so the broker is the one to ask.

Rights bought on the exchange cost money too, so a buyer pays for the rights and then for the new shares. New shares also miss any payout whose record date comes before they are issued. ASGI's new shares came too late for the monthly payout due September 30 and the one expected around October 30.

Selling works through the exchange while the rights trade, or through the fund's agent by an earlier date (October 8 at ASGI). Neither comes with a guaranteed price. Doing nothing lets the rights expire worthless. Exercising rights that could have been sold also gives up what they would have fetched.

On taxes, ASGI's federal tax summary says receiving or exercising rights is not taxable. Rights received from the fund give no tax loss when they lapse. Rights bought in the market can produce a capital loss, a loss that can be set against taxable gains.

Frequently asked questions

The information provided in this article is for educational and informational purposes only. It does not constitute financial advice, investment recommendation, or an endorsement of any particular investment strategy. Past performance does not guarantee future results. Investors should conduct their own research and consult with a qualified financial advisor before making investment decisions.

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