In this case too, the shareholders’ wealth remains the same. It is the sum of the value of the existing and new shares and the cash received from the new investors in exchange for the shares. The...

In this case too, the shareholders’ wealth remains the same. It is the sum of the value of the existing and new shares and the cash received from the new investors in exchange for the shares. The transaction involving the sale of shares by the existing shareholders to the new investors is known as a “homemade dividend”.