The holders of state-owned shares and legal person shares give up the allotment and transfer the allotment to other legal persons or the public with compensation. The new shares subscribed by these legal persons or the public when exercising the corresponding allotment are allotment. The reason is that the shareholders of state-owned shares and legal person shares do not have enough funds to buy shares according to the allotment, and they are unwilling to give up the allotment, so they choose the way of paid transfer of the preemptive right (that is, allotment). However, the transfer should be approved by the state-owned assets management department and the China Securities Regulatory Commission, and completed within the time limit stipulated in the rights issue. Because both state-owned shares and legal person shares are unlisted shares, individual shares formed by rights transfer cannot enter the trading market for the time being.
Although the rights issue can solve the problem that state-owned shareholders and legal person shareholders can't afford the rights issue, the proportion of state-owned shares and legal person shares in the total share capital is gradually decreasing. Long-term loss of controlling rights will lead to the non-circulation of public shares, affect investors' enthusiasm for subscription, and bring about confusion in the ownership structure. In order to overcome the limitation of rights issue, more and more state-owned shareholders and legal person shareholders of listed companies participate in rights issue in cash or convert their assets into cash, which greatly improves the strength of the company, not only ensures that the equity will not be diluted, but also encourages the public's confidence in the investment of listed companies.