Movie Gallery (NDAQ:MOVI) shares moved up $0.33, or 9.82%, to $3.69 today after Schultze Asset Management disclosed a 14.4% stake in the company and requested a meeting with the board to propose a number of possible shareholder value-enhancing steps.

The hedge fund suggested that the steps could include a shareholder rights offering to raise funds from existing shareholders in an effort to reduce bank and/or bond debt so that future interest expense may be lowered and/or to raise cash for generate corporate purposes.

Rights offerings are somewhat uncommon type of securities offering. They entail the company offering shareholders the right but not obligation to buy newly issued shares in the firm. Sometimes a company's management or shareholders will try to institute a rights offering in order to limit the public knowledge of buying or limit the opportunities for outsiders to enter. Depending on the terms of the offerings, they can be a great opportunity to acquire rights to purchase stock on extremely reasonable terms.

Movie Gallery was facing some trouble last year and is still burdened with substantial debt from its acquisition of Hollywood Video. The stock is up marginally, however, from its 52-week low despite having dropped shoftly after the launch of its new online rental service. The rights offering as well as the potential for more shareholder activism make MOVI a stock worth watching!

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