Capital MarketsQuestion 345 of 398
In a rights offering, a company gives its existing shareholders the opportunity to:
a.Sell their shares back to the company at a premium
b.Convert their common stock into corporate bonds
c.Buy additional new shares, usually at a discount, in proportion to their current holdings
d.Receive a guaranteed cash dividend
Explanation
A rights offering grants existing shareholders the preemptive right to purchase additional new shares, typically at a price below the market, in proportion to their current ownership. This lets shareholders maintain their proportional stake and avoid dilution when a company raises new equity.
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