However, for stock market companies, simply creating new shares or issuing stock options by fiat that are given away to employees without the company selling them at full value, existing
shareholders would experience an economic
dilution in profits (dividends) per share going down because of a
larger number of shares and, importantly, in economic value, being given away (shares of the company are literally being simply granted to someone else, namely employees).
Management may have also used the rights offering announcement as a kind of warning; the rights exercise is limited to those holding under 20 % of outstanding shares, which means potential
dilution for a
large shareholder seeking to get greater control.