Stephen owns 5,000 shares of ABNC stock. Currently, there are 1.2 million shares outstanding. The company has just announced a rights offering whereby 300,000 shares are being offered for sale at a subscription price of $24 a share. The current stock price is $27 a share. Assume that Stephen sells his rights and that all rights are exercised. What will his ownership percentage be in ABNC after the rights are exercised?

Question

Quizplus · Accepted Answer

Stephen's ownership percentage in ABNC after the rights offering, assuming he sells his rights and all rights are exercised, remains the same as before the offering because the rights offering is a proportional offering to all shareholders. Before the offering, Stephen owned 5,000 shares out of 1.2 million, which is 0.4167% (5,000 / 1,200,000 = 0.004167 * 100). After the offering, the total shares will increase to 1.5 million (1.2 million + 300,000), and since Stephen does not exercise his rights, his share count remains the same, but his percentage ownership will decrease due to the dilution. However, none of the provided percentages accurately reflect this calculation, suggesting a misunderstanding in the premise of the question as it relates to the provided answer choices.

Stephen Owns 5,000 Shares of ABNC Stock