Question

According to the company's equity share offering and allotment terms, which scenario describes the outcome for the shareholder who applied for 1000 shares but failed to pay the allotment money?

A. The shareholder was given 1000 shares but was later asked to pay the balance for allotment.
B. The shareholder was given 40,000 shares in exchange for the allotment money.
C. The shareholder received no shares despite applying for 20,000 shares.
D. The shareholder's shares were forfeited due to non-payment, resulting in a loss of allocated shares.

Answer 1

When a shareholder does not pay for the allotted shares, the shares are forfeited resulting in loss of claim. Investor 1 and 2 of Darkroom Windowshade Company can't run the company by themselves but with an additional investor holding at least 5,000 shares they can. When shares are traded on secondary markets, the company doesn't receive financial return.

Step-by-step explanation:

Shareholder Allotment Outcome and Company Management Voting

In the provided scenario, where a shareholder applied for 1000 shares but failed to pay the allotment money, the outcome that accurately describes the situation using the information given is: D. The shareholder's shares were forfeited due to non-payment, resulting in a loss of allocated shares. When a shareholder fails to meet the payment obligations, the shares can be forfeited, meaning the shareholder loses their claim on the shares.

Regarding the Darkroom Windowshade Company, to change the company's top management, a majority of shares must vote in favor of the change. Therefore, the minimum number of investors required to achieve a majority vote is dependent on the distribution of shares owned by the investors. Since investor 1 and investor 2 collectively own 38,000 shares, they do not have a majority on their own (which would require more than 50,000 shares). With six investors holding 5,000 shares each (totaling 30,000 shares), adding any one of them would secure a simple majority (68,000 shares) for investor 1 and 2 voting together.

It is essential to understand that when shares are bought and sold, the firm generally does not receive financial return unless it's an initial public offering (IPO) or additional issuance of shares. In secondary markets, the transaction occurs between current and new shareholders with no direct financial benefit to the company.

To calculate expected profit from stock investments, one must account for the probabilities of various outcomes and their respective returns. In the case of investing $1,000 with probabilities of losing everything, breaking even, or gaining $10,000, the expected profit is found by multiplying each outcome by its probability and summing the results.