SIE (Securities Industry Essentials) Practice Exam

Which securities offering allows existing shareholders to buy additional shares in proportion to their current holdings?

1. Initial Public Offering

2. Private Placement

3. Stock rights offering

4. Convertible Bond Offering

The correct answer is: Stock rights offering

A An Initial Public Offering (IPO) is a type of securities offering in which a privately held company sells its shares to the public for the first time. This is typically done to raise capital for the company's expansion or operations. B: A Private Placement is a type of securities offering in which a company sells its shares to a select group of investors, such as institutions or high net-worth individuals. This offering is not available to the general public. C: The correct answer is a Stock Rights Offering, which allows existing shareholders to purchase additional shares at a discounted price, usually in proportion to their current holdings. This type of offering is often used to raise capital quickly and is only available to current shareholders. D: A Convertible Bond Offering is a type of securities offering in which a company issues bonds that can be converted into a predetermined number of the company's shares at a later date. This is typically done to raise debt financing instead of selling shares directly.