Toner Ltd's shares are selling for $55 on the Toronto Stock Exchange (TSX) today. The company is going to issue new shares through a rights offering at a subscription price of $25.
The company needs to raise $5 million and currently has 1 million shares outstanding. You currently own 2000 Toner shares. Assume standby underwriting is used.
a) Before the expiry date, you decide to exercise your rights, what is your wealth position and percentage ownership in this company?
b) Before the expiry date, you decide to sell your rights, what is your wealth position and percentage ownership in this company?
c) Suppose you decide to let your rights expire, what is your wealth position and percentage ownership in this company?