Corporate Actions

Question 1

Which one of the following statements best reflects what happens with respect to the merger of two companies?

Answer 1

One company will exchange new shares for the shares of the other company

Question 2

A company announces a rights issue. The terms are such that shareholders that do not want to take up the offer will not be able to sell their allotted rights. This particular type of rights offer would be known as a(n):

Answer 2

Open offer

Question 3

What is a purpose of the rules contained in relevant legislation relating to a company buying back its own shares? It is there to:

Answer 3

To protect the interests of creditors

Question 4

Which of the following is not a consequence of a company undergoing a scrip issue?

Answer 4

An increase in earnings per share

Question 5

More than what percentage of a target company’s voting shares must a predator company own before legal control is achieved?

Answer 5

50%

Question 6

A company has reduced the size of its operations by selling off a part of its group which accounted for 15% of its revenue. How would it likely to return this surplus cash back to its shareholders?

Answer 6

A share buyback

Question 7

Which one of the following is not a method of a company buying back its own shares?

Answer 7

Payment in kind

Question 8

Which of the following corporate actions raises new capital?

Answer 8

Rights issue

Question 9

ABC plc has done a 1:3 rights issue and your client who is holding 12,000 shares has ask that you split the allotment letter. What is the most likely reason for this request?

Answer 9

The client intends to subcribe at nil-cost with the rights they have received.

Question 10

What do we call a mandatory corporate action that sees two companies join their interests?

Answer 10

A merger

Question 11

Which of the following is an alternative to a rights issue to raise capital?

Answer 11

Placing

Question 12

What best describes the effect on the balance sheet of a 1:1 bonus issue?

Answer 12

Share capital increases; reserves decrease

Question 13

Rights issues are initially offered to:

Answer 13

Existing shareholders

Question 14

Which one of the following is not a reason for a company wanting to buy back its own shares?

Answer 14

A company has announced a capitalisation issue

Question 15

An accelerated bookbuild is which one of the following?

Answer 15

An investment bank contacts larger institutional investors in the company to see if they would be willing to sell their shares at a certain price

Question 16

Which of the following is the best description of the meaning of a pre-emption rights issue?

Answer 16

Shares issued pro-rata to existing shareholdings

Question 17

Which one of the following is not a reason for a company to buy back its own shares?

Answer 17

To execute larger orders with a small number of investors

Question 18

A company has acquired the shares of another company resulting in takeover proceedings. Which of the following would be the minimum percentage where the takeover be considered successful?

Answer 18

75%

Question 19

A company wishes to deploy excess cash flow and return it to its shareholders. This is an example of which one of the following?

Answer 19

Share buy back

Question 20

On receipt of a letter announcing a rights issue, the holder may do all of the following except:

Answer 20

Wait until after the rights issue to assess the impact on the market before deciding on their course of action

Question 21

Which of the following would not increase a company’s share capital?

Answer 21

Exercising an option on partially paid-up shares

Question 22

Established plc wishes to perform a share buy-back. What would they need before they can perform this action?

Answer 22

Shareholders need to approve a resolution at a company meeting

Question 23

Buying options over a company’s shares is a method that may be used by an investor to build a stake in a company. This is an example of which one of the following?

Answer 23

Indirect stakebuilding

Question 24

Which of the following does a shareholder not have the right to do if a company wishes to raise funds through a rights issue and they dispatched the rights letter to all shareholders on the register?

Answer 24

Increase the holding by buying additional rights nil paid from the company

Question 25

Why would a company issue shares via a rights issue rather than a placing?

Answer 25

It considers all shareholders fairly

Question 26

Which of the following corporate actions would a company take in order to convert its reserves into new ordinary share capital?

Answer 26

Scrip issue

Question 27

Which of the following would result in an issuer of shares receiving cash?

Answer 27

Pre-emptive rights issue

Question 28

Whose approval is required before a company can buy back its own shares?

Answer 28

Shareholders

Question 29

Which one of the following is not a method of stakebuilding using an indirect method?

Answer 29

Buying shares

Question 30

How is the net asset per share affected following a 1:3 scrip?

Answer 30

Decreased by 1/4

Question 31

Stakebuilding may be undertaken for which of the following purposes?

Answer 31

To bring about a possible acquisition