A possible advantage to a rights offering is that
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 options are true.

Question

Quizplus · Accepted Answer

- A) current shareholders are protected against dilution because they have the right to purchase new shares in proportion to their current ownership.
- B) the firm has a built-in market of knowledgeable investors because the offering is made exclusively to existing shareholders who are already familiar with the company's operations.
- C) distribution costs are lower than a public offering because the firm only needs to prepare and distribute offering materials to its existing shareholders, which is typically less costly than conducting a public offering roadshow.

A Possible Advantage to a Rights Offering Is That