Products & Their RisksQuestion 6 of 398
A company issues stock rights to existing shareholders. The rights primarily allow those shareholders to:
a.Sell their shares back to the company at a premium
b.Receive extra dividends for one year
c.Buy new shares at a subscription price, usually below market, to avoid dilution
d.Vote twice on major corporate decisions
Explanation
A rights offering gives current shareholders the preemptive right to buy new shares, usually at a subscription price below the current market price, so they can maintain their proportional ownership and avoid dilution. Rights do not repurchase shares, add dividends, or grant extra votes.
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