Right Share Adjustment
What is Right Share?
A rights issue is when a company issues its existing shareholders a right to buy additional shares in the company. The company will offer the shareholder a specific number of shares at a specific price. The company will also set a time limit for the shareholder to buy the shares. In context of Nepal right shares are generally issued at the par value of Rs 100.
A rights issue is a way for a company to raise capital by offering its existing shareholders the right to buy additional shares at a discounted price, typically in proportion to their existing holdings. This is a way for the company to raise funds while giving current shareholders the opportunity to maintain their ownership percentage by purchasing more shares.
Companies most commonly issue right shares to raise additional capital. A company may need extra capital to meet its current financial obligations, regulatory obligations or it may simply seek extra capital to fund expenditures designed to expand the company's business.
What is Right Share Adjustment?
Right Share Adjustment is process to adjust the price of share after right share is issued.
How is Right Adjustment Price calculated?
For Right Adjustment Price, you need to use the following formula.
The formula is as follows:
Adjusted Price = (Market Price + (Subscription Price per Unit * Right Share % ))/(1 + Right Share %)
or
Adjusted Price = (Market Price + (Subscription Price per Unit * Right Share/100 ))/(1 + Right Share /100)
Market Price in the formula is the Supposed to be last transaction price (LTP) of scrip just before the book closure date.