Final answer:
If a shareholder does not subscribe to a rights offering, their ownership stake in the company dilutes as the total shares increase.
Step-by-step explanation:
When a shareholder fails to subscribe to a rights offering, their percentage of ownership in the company does not increase and will effectively dilute as more shares are created and owned by others. A rights offering is an opportunity given to current shareholders to purchase additional shares in the firm at a discounted price, usually to raise capital. If a shareholder does not participate in this, they do not lose their current shares but their overall stake in the company becomes a smaller fraction of the total shares outstanding, since the total number of shares has increased.
A stockholder who fails to subscribe to a rights offering will see their interest in the company prorated upwards. When a company offers existing shareholders the right to purchase additional shares of stock at a discounted price, it is called a rights offering. If a stockholder does not take advantage of this opportunity, their ownership percentage in the company will increase as the shares not subscribed to are proportionally distributed among the remaining shareholders.