Question

1. Franklin Minerals recently had a rights offering of 12,000 shares at an offer price of $17 a share. Isabelle is a shareholder who exercised her rights option by buying all of the rights to which she was entitled based on the number of shares she owns. Currently, there are six shareholders who have opted not to participate in the rights offering. Isabelle would like to purchase these unsubscribed shares. Which one of the following will allow her to do so?

A) Standby provision

B) Oversubscription privilege

C) Open offer privilege

D) New issues provision

E) Overallotment provision

Answer 1

Oversubscription privilege will allow an investor to buy excess amount of shares in right issue which were not subscribed by other investors so in this case, Isabelle can subscribe through oversubscription privilege and she would be entitled to other shareholders securities through right issue.

Rest of the options like standby provision and over allotment provision and open offer privilege along with new issue provision are not relevant in this scenario as they are not allowing investor to purchase excess security.

Correct answer would be option (B) oversubscription privilege