You currently own 10 % of the 2 million outstanding shares of the Perry Co. The company has just announced a rights offering with a subscription price of $30. Every shareholder will receive one right for every share of stock they own. This offering will provided $15 million of new financing for the firm, ignoring all issue costs. What will be your new ownership position if you opt to sell your rights rather than exercise them?

Question

Quizplus · Accepted Answer

If you sell your rights instead of exercising them, your ownership percentage will decrease because the total number of shares will increase after the rights offering. The new ownership position will be 8.0%.

You Currently Own 10 % of the 2 Million Outstanding