Question

in a rights offering, when an existing stockholder is notified that they have been given one right for each share of stock owned, they can do which of the following? multiple select question. do nothing and let the rights expire keep the rights indefinitely order all the rights to be sold subscribe to the full number of entitled shares

Answer 1

In a rights offering, existing stockholders can choose to let the rights expire, keep them indefinitely, or subscribe to the full number of entitled shares.

Step-by-step explanation:

In a rights offering, when an existing stockholder is notified that they have been given one right for each share of stock owned, they can do the following:

1. Do nothing and let the rights expire: This means the stockholder chooses not to exercise their rights and allows them to expire. This is a passive action that results in no additional investment.
2. Keep the rights indefinitely: The stockholder can choose to hold onto the rights without exercising them. They can potentially sell these rights to other investors if there is demand.
3. Subscribe to the full number of entitled shares: This means the stockholder decides to exercise their rights and purchase additional shares of stock at a predetermined price.

The option to 'order all the rights to be sold' is not available to the stockholder. The rights can be freely traded, but the stockholder can't order them to be sold.

Answer 2

In a rights offering, stockholders can either do nothing and let the rights expire, subscribe to the full number of entitled shares, or order all the rights to be sold. Keeping the rights indefinitely is not an option as rights have an expiration date.

Step-by-step explanation:

In a rights offering, an existing stockholder is provided with the option to buy additional shares in the company at a discount to the public market price. When they receive one right for each share they own, they typically have several options:

• Do nothing and let the rights expire, which is essentially a decision not to participate in the rights offering.
• Subscribe to the full number of entitled shares, meaning they exercise their rights to buy additional shares at the discounted price.
• Order all the rights to be sold, where they sell the rights on the open market to another investor who may want to subscribe to the shares.

It is not possible to keep the rights indefinitely, as rights have an expiration date by which they need to be exercised or sold.