ACCA Applied Knowledge · Business and Technology · Accounting and finance functions within business organisations
A listed company offers new shares to its existing shareholders in proportion to their current holdings, usually at a discount to the market price. What is this called?
This is a rights issue. New shares are offered to existing shareholders in proportion to their holdings, typically at a discount, raising cash. A bonus issue gives free shares and raises no cash, while placings and public offers are aimed at new investors.
- AA bonus issue
- BA rights issueCorrect
- CA placing
- DA public offer for sale
Explanation
A rights issue offers new shares to existing shareholders pro rata, normally at a discount, and raises cash. A bonus issue is free and raises no cash, while a placing and an offer for sale target new investors.
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