TLDR:
An oversubscription privilege allows existing shareholders to purchase additional shares beyond their pro-rata entitlement in a rights offering if other shareholders don’t exercise their rights, preventing dilution.
Oversubscription Privilege in Rights Offerings
In a rights offering, shareholders receive the right to buy additional shares in proportion to their existing holdings. Oversubscription privileges allow shareholders to request additional shares beyond their pro rata allocation, filling shares that other shareholders declined to purchase. This mechanism is particularly important in recapitalization rights offerings where a company needs to raise a fixed amount — oversubscription ensures all available shares are purchased even if some shareholders decline their basic rights.