An equity issue sold to the firm's existing stockholders is called:
A) A rights offer
B) A general cash offer
C) A private placement
D) A discriminatory-price auction

Question

Quizplus · Accepted Answer

A rights offer is an offering of new securities to a firm's existing stockholders, usually at a discount to the current market price. This allows current shareholders to maintain their proportional ownership in the company without having to compete with new investors in a general cash offer or private placement. A discriminatory-price auction is a different type of equity offering mechanism where investors bid on shares at varying prices, not an offering to existing stockholders.

An Equity Issue Sold to the Firm's Existing Stockholders Is