What is the primary difference between an open offer and a rights issue?

The primary difference between an open offer and a rights issue lies in the method of offering shares to existing shareholders and how those shares can be dealt with after they are allocated.

An open offer allows existing shareholders to subscribe for additional shares in a company, typically at a discount to the market price. Importantly, shareholders have the flexibility to sell their entitlement to subscribe for these additional shares (often referred to as "nil paid" shares) if they choose not to take up the offer themselves. This feature provides liquidity and choice for investors, as they can potentially monetize their rights before they expire.

In contrast, while a rights issue also allows existing shareholders to purchase additional shares at a specified price, it often comes with different restrictions regarding the trading of rights. Generally, rights issues do not afford the same degree of freedom for sureties to transfer their rights in the market as open offers do. This significant distinction highlights why the correct answer focuses on the ability to sell nil paid shares as a differentiating factor between the two methods of capital raising.