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Hi John,
I know it’s not an important point for the syllabus, but at the top of page 82 of the F3 course notes, you mention that an existing shareholder may sell the rights of a “rights issue” to others, should he not want to take it up himself.
Does the purchaser have to be an existing shareholder of the company, or can it be somebody currently without any shares in the company (who could ultimately buy the perk of extra shares for a lower price)?
Many thanks,
Andrew
It depends on the terms of the rights issue. If it is a company quoted on the stock exchange, then anybody can buy the rights – they do not have to be an existing shareholder. However the amount they have to pay to the person selling the rights plus the amount they then have to pay to take up the shares, will be equal to the cost of buying the shares on the stock exchange.
However, none of the above can be asked in Paper F3 (it is in Paper F9 that it becomes important).
Thanks for the quick reply. 🙂
I’m studying for F7 at the moment, but just flicked through my old notes to help refresh F3 and just wondered about this.
No problem 🙂
(I don’t think it can be asked in F7 either – just at F9 – but I don’t teach F7 🙂 )
Thanks John.
And congratulations on your Editor’s Special PQ Award 2015!
You’ve heard it 100 times before I’m sure, but my BPP & Kaplan courses had me so disillusioned and miserable with accountancy as a subject, but your teaching has made me truly love and understand it.
I can’t thank you enough.
Hope one day you’ll let me buy you a drink (or 10).
Cheers,
Andrew
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