There are a number of possible advantages to a rights offering:
A) current shareholders are protected against dilution.
B) the firm has a built-in market of knowledgeable investors.
C) distribution costs are lower than a public offering.
D) all of these.

Question

Quizplus · Accepted Answer

All three options are true advantages of a rights offering. Current shareholders are protected against dilution by being given the opportunity to purchase new shares at a discounted price, which also provides a built-in market of knowledgeable investors who are familiar with the company. Additionally, distribution costs are lower than a public offering because the offering is only made to current shareholders, so there is no need for costly advertising or underwriting fees.

There Are a Number of Possible Advantages to a Rights