HKSI Paper 7 The equity market question: Chan's percentage holding afterwards

HKSI Paper 7The equity market

Mr Chan holds 3 million of Lok Fu Ltd's 30 million shares. Lok Fu places 10 million new shares with other investors. What is Mr Chan's percentage holding afterwards?

A 6.7%
B 7.5%
C 10.0%
D 25.0%

Show the answer and explanation

Answer: B. 7.5%

After the placing there are 30 million + 10 million = 40 million shares. Mr Chan still holds 3 million, so his stake is 3 / 40 = 7.5%. A placing to new investors is not pro rata, so existing holders who do not take part are diluted; a rights issue would have let him keep 10% by taking up his entitlement. 6.7% comes from cutting his 10% by a third (10 million / 30 million) instead of recalculating on the enlarged share count. 10.0% ignores dilution altogether. 25.0% is the new investors' share of the enlarged capital (10 / 40), not Mr Chan's. Source: Standard corporate finance (dilution from a non-pro-rata issue) (as at October 2026).

Common mistake

Reducing the old percentage by the size of the issue instead of dividing the unchanged holding by the enlarged number of shares.

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Original study material mapped to the public HKSI Paper 7 syllabus. Unofficial, not endorsed by HKSI Institute or the SFC. Verify figures and rules against current guidance before relying on them.