Rights Regarding Shares Formula
Description
How to fill out Investor Rights Agreement Regarding The Purchase Of Series C Preferred Stock Shares?
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FAQ
A rights share issue is an offering of rights given to a company's existing shareholders, allowing them to purchase additional shares directly from the company at a discounted price, rather than buying them through the secondary market.
A stockholder usually receives 1 right for each stock owned at the rights record date, when the rights certificates are issued to shareholders as of the rights record date. This gives the stockholder the right, but not the obligation, to buy additional shares of stock at the subscription price.
The calculation of the Theoretical Ex-Rights Price (TERP) involves a specific formula: TERP = [(Number of existing shares * Price per share) + (Number of new shares * Rights issue price)] / Total number of shares after the rights issue.
Advantages. Companies generally offer rights when they need to raise money. Examples include when there is a need to pay off debt, purchase equipment, or acquire another company. In some cases, a company may use a rights offering to raise money when there are no other viable financing alternatives.
If you know the market cap of a company and you know its share price, then figuring out the number of outstanding shares is easy. Just take the market capitalization figure and divide it by the share price. The result is the number of shares on which the market capitalization number was based.