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What happens when the shareholder allows the rights to lapse ? Does the company automatically sells the rights on shareholder behalf and pay him the value of rights ?
In one of the question of BPP study text, the shareholder allows the rights to lapse and as the result his net worth decreases because-
The ex-rights price of share falls and he doesn’t get any value for his rights.In practice, companies do sell the rights on behalf of the shareholders, but they do not have to do that.
In the exam assume that it only happens if the question specifically says so.
Thanks. Another ques i have is .what is meant by this sentence – “A Company issues low dividends and offers scrip dividends regularly and shareholders concession.” What is shareholder’s concession in this?
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