DLID Co., Ltd, a Hong Kong listed Property Company, has announced a rights offer to raise 3,000,000
Question:
DLID Co., Ltd, a Hong Kong listed Property Company, has announced a rights offer to raise 3,000,000 new shares issued at a $10.05 subscription price. There are 9,000,000 shares outstanding trading at $14 each.
(a) Provide any two reasons why the company might choose a rights offering rather than a general cash offer.
(b) Identify the ex-rights price and the value of a right. (Show your calculations).
(c) Assume stockholders get one right for each share of stock they own and it needs 6 rights to subscribe to a new share. Show why a shareholder with 1,000 shares of DLID before the offering and no desire to buy additional shares is not harmed by the rights offering.
Corporate Finance
ISBN: 978-0071339575
7th Canadian Edition
Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe, Gordon Ro