Assuming the market price falls to the theoretical ex-rights price, which action by a shareholder will REDUCE their wealth following a rights issue (assuming no payment is received for rights not taken up)?

Correct answer: B) Doing nothing and allowing the rights to lapse

Explanation

If the shareholder takes up the rights, the fall in value of the existing shares is offset by the gain on the new shares bought below market value. If the rights are sold, the sale proceeds offset the fall in share value. If the rights lapse with no compensation, the shareholder suffers the fall in share price with nothing to offset it, so wealth falls.