Rights issue — TERP and the value of a right calculator

In short

Why the ex-date drop is arithmetic.

Interactive: rights issue — TERP and the value of a rightMedium

Share price before $ Subscription price $ Existing shares in the ratio New shares in the ratio Shares you hold

Theoretical ex-rights price: —
Price drop on the ex-date: —
Value of one right: —
Subscription discount: —
Your entitlement: —
Wealth check: —

The wealth line is the point: shares at TERP plus the rights equals what you held before. Set the subscription price to 2 with a 3-for-1 ratio and the "60% crash" on the ex-date is entirely arithmetic. What is not arithmetic is why the company needs the money — see the rights issue page.

The idea behind it

This calculator belongs to Corporate Actions, where the mechanism it computes is explained step by step, with the formula, what each input means and where the simple model stops being right. Everything is computed in your browser; nothing you type is sent anywhere.

Instruments it applies to

Rights Issue — A short-dated option handed to every shareholder for free — and the one corporate action where doing nothing is the only guaranteed way to lose money.

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The same in full — six points, and why each one matters

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