mini_case_rights_issue_HSBC_521_2011

# mini_case_rights_issue_HSBC_521_2011 - Rights Issue Rights...

This preview shows pages 1–4. Sign up to view the full content.

Rights Issue Rights Issue - Issue of securities offered only to current stockholders. Example - AEP Corp currently has 11 million shares outstanding. The market price is \$24/sh. AEP decides to raise additional funds via a 1 for 11 rights offer at \$22 per share. If we assume 100% subscription, what is the value of each right?

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
Rights Issue Current Market Value = 11 mil x \$24 = \$264 mil Total Shares = 11 mil + 1 mil = 12 mil Amount of new funds = 1 mil x \$22 = \$22 mil New Share Price = (264 + 22) / 12 = \$23.833/sh Value of a Right = 23.833 - 22 = \$1.833 What is the payoff to a shareholder with 11 shares? Example - AEP Corp currently has 11 million shares outstanding. The market price is \$24/sh. AEP decides to raise additional funds via a 1 for 11 rights offer at \$22 per share. If we assume 100% subscription, what is the value of each right?
Rights Issue (not fully subscribed) Suppose the previous rights offer is only 50% subscribed. What is the value of the right now?

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
This is the end of the preview. Sign up to access the rest of the document.

## This note was uploaded on 01/02/2012 for the course FINANCE 347 taught by Professor Bayou during the Fall '11 term at NYU.

### Page1 / 11

mini_case_rights_issue_HSBC_521_2011 - Rights Issue Rights...

This preview shows document pages 1 - 4. Sign up to view the full document.

View Full Document
Ask a homework question - tutors are online