You are stockholder in a SmallTech, a company that is planning to raise new equity. The stock is trading at $15 per share, and there are 1 million shares outstanding. The firm issues 500,000 rights to buy additional shares at $10 per share to its existing stockholders.
a. What is the expected stock price after the rights are exercised?
b. If the rights are traded, what is the price per right?
c. As a stockholder, would you be concerned about the dilution effect lowering your stock price? Why or why not?

  • CreatedApril 15, 2015
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