Question

shares at $15 a share. Are does not sell or exercise her rights. Thus, Todd purchases 20 shares at the subscription price Todd Aniel and Todd both own rights on TL stock that at each of them the night to purchase cd ΟΟΟΟΟ

Answer 1

Todd exercised an Oversubscription privilege.

Reason-

• Oversubscription privilege apply to existing shareholders.
• In a rights offering, a firm generally offers its existing shareholders the right to purchase a specific number shares at a discount to the current share price within a given time period.
• Since companies issue shares to raise money and a failure to sell all new shares in an issuance could leave a firm undercapitalized, rights issues sometimes use a form of contingency plan to deal with shareholders who decide not to exercise their right to purchase new shares.
• Oversubscription privileges allow shareholders additional rights to purchase a specified proportion of the unexercised shares.