Trumpoff Ltd has 60 million shares on issue with a current market share price of $4.50 per
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Question:
Trumpoff Ltd has 60 million shares on issue with a current market share price of $4.50 per share. The company raises $20 million by placing 5 million shares at $4.00 each to a group of financial institutions that previously held no shares in the firm. As a result of this private placement,
a) existing (pre-placement) shareholders have their voting power diluted.
b) there is a transfer of wealth from new shareholders to existing shareholders.
c) the wealth of existing shareholders is expected to drop from $270 million to $250 million (to the nearest $m).
Group of answer choices
1. b) only
2. a) only
3. c) only
4. Both a) and c)
5. All of a), b) and c)
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