Valuation considerations on right issues Flashcards
What is true about right issues (several answers)?
a) Ineffective way to raise substantial amount of new capital
b) Only some of the existing shareholders are invited to participate.
c) Relatively quick to implement. Need approval from the board of company and the shareholders.
d) The amount to be raised can be guaranteed by third party.
e) All of the above.
c) and d).
It’s an effective way to raise substantial amount of new capital.
All existing shareholders are invited to participate.
Combine term and description.
a) Cum right price
b) Subscription right
c) Subscription price
d) Subscription period
e) Ex-right price
f) Ex-right date
g) TERP
i) First date of share without the right
ii) Price of new share issued, set in advance, typically at discount (P)
iii) Price before SEO announcement (p)
iv) Share price after detachment of the right
v) Theoretical price of stock at ex-right date
vi) Period during which subscription of new shares can be made paying the subscription price.
vii) The financial instruments that entitled the holder to subscribe new shares
a) - (iii)
b) - (vii)
c) - (ii)
d) - (vi)
e) - (iv)
f) - (i)
g) - (v)
What is true when the ex-right price is lower than the subscription price?
a) Exercise here, to make profit. Sell and obtain profit. Ex-right price and market price will evolve together. Demands rational market.
b) No incentive to exercise the right. You will exercise at a higher price, than the market price. Not convenient.
c) This relation is not possible.
d) This relation very rarely happen.
b)
What is true when the ex-right price is higher than the subscription price?
a) Exercise here, to make profit. Sell and obtain profit. Ex-right price and market price will evolve together. Demands rational market.
b) No incentive to exercise the right. You will exercise at a higher price, than the market price. Not convenient.
c) This relation is not possible.
d) This relation very rarely happen.
a)
