There are times when a company would want to raise capital from the stock markets but does not want to dilutute the share holding structure of its existing shareholders.
What the company would rather do will be to give its existing shareholders the chance to buy more shares at a discounted price.
Share holders can take any of the follwing actions:
Take up the right,
Sell the right, or
The first two actions will ensure that the shareholder is not worse-off while the last option is not a good option.