NISM Certifications · NISM-Series-XXI-A: Portfolio Management Services (PMS) Distributors · Introduction to Securities Markets
Which statement about a rights issue by a listed company is correct?
In a rights issue, a company offers new shares to its existing shareholders in proportion to the shares they already hold. It is not open to the general public or restricted to institutions or promoters. This lets shareholders maintain their ownership percentage if they subscribe.
- AShares are offered only to new investors who apply through a public bid
- BShares are offered to existing shareholders in proportion to their holdingsCorrect
- CShares are offered only to qualified institutional buyers
- DShares are offered only to the promoters of the company
Explanation
In a rights issue, new shares are offered to existing shareholders in a fixed ratio to their current holdings. Public bidding by new investors describes a public issue, and offers only to QIBs describe a QIP.
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