Question

Franklin Minerals recently had a rights offering of 12,000 shares at an offer price of $17 a share. Isabelle is a shareholder who exercised her rights option by buying all of the rights to which she was entitled based on the number of shares she owns. Currently, there are six shareholders who have opted not to participate in the rights offering. Isabelle would like to purchase these unsubscribed shares. Which one of the following will allow her to do so?A) Standby provisionB) Oversubscription privilegeC) Open offer privilegeD) New issues provisionE) Overallotment provision

Answer 1

Answer: B) Oversubscription privilege

Explanation:

Oversubscription privilege is a provision that is given to the shareholders of a company during the issuance offers of rights or warrants that allows them to buy any outstanding shares remaining if other shareholders have had a chance to buy them and did not.  

Isabelle can therefore purchase these unsubscribed shares from the six shareholders who have opted not to participate in the rights offering under the Oversubcription clause.