SIE practice questionhardRights Offering
A company offers rights to purchase shares at $22 when the market is $24. If a shareholder does not exercise, what happens?
- AThey receive an automatic dividend.
- BThey gain extra voting rights.
- CTheir cost basis increases.
- DTheir ownership percentage is diluted.✓ Correct answer
Explanation
Why D — Their ownership percentage is diluted.
Not exercising means new shares are sold to others, reducing the shareholder's percentage. Other options are not results of non-participation.
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