Question

Deep Water Marina has 12,000 shares of stock outstanding that were sold to the general public last year. The firm has just decided to issue an additional 4,000 shares and will make these shares available to the firm's current shareholders before making any offer to the general public.
Which type of offer is this?

a. General cash offer
b. Rights offer
c. In-house offering
d. Private placement
e. Initial public offering

Answer 1

Answer:

B) Rights offer

Explanation:

A rights offering (or rights issue) occurs when a corporation decides to issue additional stock and offers these new stocks to existing stockholders in the same proportion to their current holding percentage. Only the stocks that are not purchased by existing stockholders will be offered to other investors.