Rights issues are exposed to the risk that share prices may fall prior to the subscription date, such that the rights will not result in the sale of new shares in the company.

Question

Quizplus · Accepted Answer

This is true because rights issues allow existing shareholders to purchase additional shares at a discounted price, but if the share prices fall before the subscription date, shareholders may not be interested in taking up the offer, which means that the new shares may not be sold.

Rights Issues Are Exposed to the Risk That Share Prices