Journal of Financial and Quantitative Analysis Vol. 8 No. 5 1973
On Shareholders' Indifference to the Proceeds Price in Preemptive Rights Offerings
Abstract
It has been discovered in the context of various stock valuation models (see [1], [2] and [4]) that the shareholder is indifferent to the proceeds (or subscription) price chosen in a preemptive rights offering of equity capital, provided that the total equity capital raised by the offering is fixed. In this note we generalize this result to any stock valuation model in which arbitrage is present and which values only the total amount of the new investment, that is, places no value on holding more (or fewer) shares with a lower (or higher) market price.
- DOI
- 10.2307/2329986
- Volume
- 8
- Issue
- 5
- Pages
- 835
- Sources
- crossref openalex