Rights issues in Australia are underwritten:
A)because shareholders may be unaware of the rights issue because they do not always open their mail.
B)because the share price may fall after the rights issue is announced,thereby making it less attractive to shareholders.
C)either because shareholders may be unaware of the rights issue because they do not always open their mail or because the share price may fall after the rights issue is announced,or both,thereby making it less attractive to shareholders.
D)none of the given options.

Question

Quizplus · Accepted Answer

Underwriting rights issues in Australia is done to mitigate the risks of shareholders being unaware of the issue or the share price falling after the announcement. By having underwriters commit to purchasing any remaining shares, companies can ensure that they will still receive the necessary funding for their projects. Therefore, both options A and B are valid reasons for underwriting rights issues.

Rights Issues in Australia Are Underwritten