Global ltd. , a pharmaceutical company, has concluded that additional equity financing will be needed t o expand operations and that the needed funds will be best obtained through a rights issue. Global is planning to raise £30 million to finance its operations while the number of outstanding shares is 4 million . The shares of the company are currently sell i ng for £ 3 0 per share .
a) If the subscription price is set at £ 2 0 per share, how many shares must be sold?
b) How many rights will it take to buy one share?
c) What is the ex - rights price and the value of a right?
d) Show how a shareholder with 500 shares before the offering and no desire (or money) to buy additional shares is not harmed by the rights offer.