Equity financing

Sir also in the lecture (20:25) you are saying that rights issue offer price ($3) is always lower then market price ($5) because if people wanted to buy at $5 they would have bought already, therefore issue at lower price. But on the stock exchange if they buy ..the money will get transferred only between the two shareholders who just traded shares on stock exchange and company will not receive any money .. i'm confused in this concept ... Thanks

Or that rights issue has nothing to do with stock exchange ..but exis5ing shareholders are just encouraged to buy shares at a price which is basically offered under valued...

First question: they are the same. Second question: A rights issue is an offer of new shares by the company in order to raise money. Nobody would bother buying new shares if they were costing more than it would cost to buy more existing shares on the stock exchange from other shareholders.