Which of the following describes a 'rights offering'?

Question: Which of the following describes a 'rights offering'?

Answer options:

• A company offers new shares to the general public to raise capital. ✅ Existing shareholders are given the option to purchase additional shares of the company at a discounted price.
• A company offers its shares directly to institutional investors without a public issuance.
• Employees are granted stock options as part of their compensation package.

Correct answer: Existing shareholders are given the option to purchase additional shares of the company at a discounted price.

Explanation: A rights offering gives existing shareholders the 'right' to purchase additional shares directly from the company, typically at a discounted price, before the shares are offered to the public, allowing them to maintain their proportionate ownership.