Summary

When companies decide to obtain equity funding from external sources, they would have to consider sources from which funds can be obtained and types of equity securities to issue. In this topic, we have reviewed the common types of equity securities and their general features. We have also described some ways in which funds can be obtained from the equity market.
we have also looked into the effect of several corporate exercises on the company and it shareholders.

Self-Assessment / Activity
Question 1 to 3 are based on the information given below:
Company ABC, offers a rights issue of RM 1.60 on the basis of one rights share for every held (one for five). The weighted average market price of the company’s shares for the last five days is RM 2.50.
1. What is the value of the rights issue?
A. RM 0.42
B. RM 0.32
C. RM 0.22
D. RM 0.12

2. What is the theoretical of ex-price for the right issue?
A. RM 2.00
B. RM 2.18
C. RM 2.22
D. RM 2.25

3. What is the discount being priced in the subscription price of the right issue?
A. 26.7%
B. 20.7%
C. 30.7%
D. 19.2% .