Evaluate proposed option relative

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On 18 December 2019, Japfa Limited, an industrial agri-food company listed on the Singapore Exchange (SGX) announced a proposal to raise funds via a rights issue. The stock closed at $0.575 that day, and the announcement was made after the market close. The Offer Information Statement (OIS) lodged with the Monetary Authority of Singapore is dated 14 January 2020.

You are discussing this rights issue with a friend. Use the information on the rights issue from the OIS, which can be retrieved from the SGX website, to answer the following questions:

(a) Suppose you invested $10,350 in Japfa's stock just before the market closed on the announcement date of the rights issue. Your friend says that markets are efficient and that you are protected even if you ignore the rights issue. Evaluate his proposed option relative to the options of buying the rights shares or trading the "nil-paid" rights, quantitatively if applicable.

Reference no: EM133072546

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