Equity Securities; Rights

Question 1

RIGHTS

Answer 1

RIGHT TO VOTE AT SHAREHOLDER MEETINGS ON ISSUES THAT PERTAIN TO THEM AS PART OWNERS

RIGHT TO TRANFER SHARES

RIGHT TO SEE QUARTERLY AND ANNUAL FINANCIAL REPORTS

Question 2

DIVIDENDS

Answer 2

MONEY PAID OUT TO COMMON AND PREFERRED STOCKHOLDERS

NOT GUARANTEED

ARE PAID IF THE BOARD OF DIRECTORS OF A CORPORATION DECIDES TO PAY IT

Question 3

DIVIDENDS CAN BE PAID IN THESE WAYS;

Answer 3

CASH
STOCK SHARES IN THE COMPANY
STOCK SHARES OF A SUBSIDIARY COMPANY
COMPANY PRODUCTS (RARE)

CASH DIVIDENDS ARE TAXABLE, BUT STOCK DIVIDENDS ARE NOT!
CASH DIVIDENDS ARE TAXED AT CAPITAL GAINS RATE OF 15%
TO QUALIFY FOR 15% INVESTOR MUST BE IN FOR AT LEAST 60 DAYS

Question 4

PREEMPTIVE RIGHT

Answer 4

THE RIGHT OF SHAREHOLDERS TO BUY NEW SHARES ISSUED BY THE COMPANY AND THEREBY KEEP THEIR PROPORTIONAL OWNERSHIP, THIS CAN PROTECT SHAREHOLDERS FROM BEING DILUTED

NOT ALL STOCKS HAVE PREEMPTIVE RIGHTS

Question 5

RIGHTS OFFERING

Answer 5

In a rights offering the company offers current shareholders the right to purchase more shares at a discount to the market price of the stock for a limited time

This is done if a corporation decides to raise money by issuing additional shares

RiGHTS offerings usually expire after 2 to 4 weeks

AN INVESTOR CAN USE, SELL OR LET IT EXPIRE

THE DISCOUNTED PRICE IS CALLED THE SUBSCRIPTION PRICE