No, not quite correct, as I understand it. Basically this is a way that common shareholders can profit from a leveraged takeover and disincentivize such a takeover.
If any stock holder that currently owns less than 10% of the company increases their holdings over that amount then every shareholder (except for that person) can purchase rights for $3.25. Each right is worth $6.50 in stock. The rights also become available for sale if any holder that currently has a position greater than 10% of the O/S purchases any additional stock.
The only thing that I'm not sure about is whether there is a waiting time for exercise after purchase-probably not. Anyway, if they become available you can potentially double your money if the timing is just right. We could also see the PPS dump as a ton of people buy rights, exercise and dump. I've never been in the situation, but I'll be reading up on it.
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