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CTP · Question #131
(Topic 2) A publicly traded company is looking to fund its next project with the issuance of stock. The company's stock is primarily held by a small group of investors. The company is concerned that…
The correct answer is B. Grant the investors pre-emptive rights to the new issue. See the full explanation below for the reasoning.
Question
- (Topic 2)
A publicly traded company is looking to fund its next project with the issuance of stock. The company’s stock is primarily held by a small group of investors. The company is concerned that issuing stock may upset these investors because it would dilute their holdings. Which of the following strategies would help address the investors’ concern?
Options
- AGrant the investors cumulative voting rights.
- BGrant the investors pre-emptive rights to the new issue.
- CAllow the investors to cast their votes by proxy at the next shareowners meeting.
- DOffer to stagger the election of directors.
How the community answered
(29 responses)- A3% (1)
- B83% (24)
- C10% (3)
- D3% (1)
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