DLID Co., Ltd, a Hong Kong listed Property Company, has announced a rights offer to raise 1,000,000 new shares issued at a $10.05 subscription price. There are 6,000,000 shares outstanding trading at $11 each.

(a) Provide any two reasons why the company might choose a rights offering rather than a general cash offer. (2 marks)

(b) Identify the ex-rights price and the value of a right. (Show your calculations). (4 marks)

(c) Assume stockholders get one right for each share of stock they own and it needs 6 rights to subscribe to a new share. Show why a shareholder with 1,000 shares of DLID before the offering and no desire to buy additional shares is not harmed by the rights offering.