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Question 12.2: From the above example, consider the point of view of the co...

From the above example, consider the point of view of the company, which has 10,000,000 shares outstanding. Given the current price of 50 €, the total capitalization is 500,000,000 €.

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If all the shareholders of the company choose to exercise their stock option, the company’s outstanding shares would increase by 10,000,000, with a new market capitalization (given by the sum of old capitalization plus the cash received from investors exercising the rights) of.

500,000,000+\left(25\times 10,000,000\right) =750,000,000  €

Related Answered Questions

Question: 12.1

Consider an investor having 1000 shares of some company for a total investment of 50,000 €. Stock price is therefore 50 €, and assume it did not change between date of purchase and date of rights issuance. If rights give a 1 to 1 subscription right, at an offer price of 25 €, the investor can buy ...

Verified Answer:

\frac{\left(50,000+25,000\right) }{2000}= 3...