What is a rights issue of shares?

A rights issue of shares is specifically a method by which a company raises additional capital by giving its existing shareholders the opportunity to purchase new shares at a discount to the current market price. This allows shareholders to maintain their proportional ownership in the company, as the new shares are offered preferentially to them before any public offering.

By pricing the new shares at a discount, the company incentivizes existing shareholders to take up the offer, making it an appealing option for raising funds. This method is a way to prevent dilution of existing shareholders' stakes while also ensuring that the company can secure the necessary capital.

While some options might involve new shares being offered to the public or existing shareholders at different valuations, a rights issue specifically refers to the discounted offer to existing shareholders, making option C the correct answer.