07 Oct 2021

While this may seem like a big deal, purchase rights can also lead to a drop in a company`s stock price, as the issuance of subscription rights can dilute outstanding shares. In addition, the exercise of sales rights can reduce a company`s earnings per share (EPS). Earnings per share are the earnings of a company divided by current shares. In fact, a foreigner buys the right to buy shares through an option; as regards share purchase rights, this right is already intrinsic for existing shareholders. In both cases, there is an agreed timetable for concluding the agreement. In the case of employee stock options, a person may have to wait a certain period of time before exercising the right to purchase the shares. The ban period encourages employees to stay in the company and is usually one to three years. Option contracts are traded on a stock exchange and give holders the right, but not the obligation, to buy or sell a security. Option contracts are generally available to all investors. Holders of share purchase rights may or may not acquire an agreed number of shares at a predefined price, but only if they are an existing shareholder. Under an option agreement, shares are issued to the buyer when he exercises the option and pays the exercise price.

This is called “Forward Vesting”, which contrasts with “Reverse Vesting” under a Share Vesting Agreement. Startups also spend purchase rights, as it is often difficult to obtain financing from banks when a company has not yet made a profit. For example, a company announces the development of a consumer product that is expected to conquer the world in the storm, such as a virtual reality headset that is no larger than a pair of sunglasses. According to initial estimates, the product will be a great success and the share price is expected to retreat…