Example
of Theoretical ex right price
The theoretical ex right price is the price at which
the share shall be traded in stock exchange after right issue. The theoretical
ex right price is lower of share is lower than share price before issue because
the price is to adjust the price due to new issue at lower price.
Example
of Theoretical ex right price
|
Issued
Shares Jan,2012
|
1,000,000 @ 2
|
|
Right
issue 1 for 10 Share
|
|
|
Market
Price
|
$ 4
|
|
New
Issue Price
|
$ 3
|
|
Calculate
Theoretical Ex Price
|
|
Solution
It is important to remember that exiting shares are
multiplied with the market price, right issue share are multiplied with new issue
price. The market price of existing shares and issue price of right issue are
sum up and divided by total number of shares after right issue.
|
10
Shares @ 4
|
40 $
|
|
1
Shares @ 3
|
3
$
|
|
11
Shares
|
43 $
|
|
Theoretical Ex price Price ( $43/ 11)
|
3.90 $
|
|
|
|
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