This is when a company may offer its shareholders the right to buy new shares for cheaper-than-the-market price. Which means they work very similarly to rights issues, but open offers also give you the chance to buy additional discounted shares, though that’s not guaranteed and can be scaled back if oversubscribed.
Where an open offer differs from a rights issue is that you don’t have the option to sell your rights in the market. Because you don’t have this option, if you do nothing, you won’t get any cash from the sale.
So as a shareholder, you usually have a couple of options when an open offer is announced:
Take up all or part of the basic entitlement of shares – by paying the discounted price of the shares, and increasing your investment in the company. You're guaranteed the basic entitlement as a minimum and may also get an excess too, depending on the offer. There’s no stamp duty payable when you buy shares in an open offer.
Take no action – you won’t buy the basic entitlement of shares, and won’t receive any cash from the sale (as you might do with a rights issue).
If a company you have shares in announce an open offer, you’ll be sent a corporate action notification with all the details of this.