Currently,you own 7 percent of the outstanding stock of Metals Unlimited.The firm has decided to issue additional shares of stock and has given you the first option to purchase 7 percent of those additional shares.Which one of the following will you be participating in if you opt to purchase the shares you have been offered?

Question

Quizplus · Accepted Answer

The option given to purchase additional shares is a rights offer, as it is specifically offered to current shareholders in proportion to their current ownership percentage. A red herring offer is a preliminary prospectus for an initial public offering (IPO), while a private placement is a sale of securities to a small number of private investors. An IPO is the first sale of stock to the public by a previously private company, and a general cash offer is a sale of securities to the public without a specific target market.

Currently,you Own 7 Percent of the Outstanding Stock of Metals