What is meant by a deeply discounted rights issue

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Reference no: EM132976813

Adam plc (public limited company) has in issue 2,000,000 equity shares. The shares have a current market value of £4 per share. The company now plans to issue rights to purchase one new share, at a price of £2.50 per share, for every five shares held.

Required:

Problem a) A shareholder owns 50,000 shares in Adam plc. Show the effect of the rights issue upon the shareholders wealth assuming that the shareholder:

i) Sells all the rights

ii) Takes up all the rights

iii) Does nothing at all

Problem b) Define and explain what is meant by a deeply discounted rights issue.

Problem c) Discuss and evaluate the different methods of floating a company on the new issue market of the London Stock exchange main market.

Reference no: EM132976813

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