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Dec 07 Q2-Llama, question C, when calculating EPS, how to understand 131,250,000 shares working steps (especially x100/96 part), any other way to get the result? Thanks
100/96 is the bonus fraction.
Bonus fraction = cum rights price/ ex rights price
cum rights price is the pre-issue market price.ex rights price is calculated as follows:
4 shares @ 100cents = 400 cents
1 share @ 80 cents = 80 cents
5 shares……………….480 cents
[one share for every four held ]ex rights price = 480 cents/5 shares =96 cents
weighted average number of shares
(number of shares before rights issue is multiplied by the bonus fraction.)120m shares * (9/12) * (100/96) =93.75m shares
150m shares * (3/12) = 37.5m shares
TOTAL 131.25m shareshow to get 150m shares
(120m/4)*1 =30m [Rights Issue]
120m shares before rights issue + 30m shares Rights Issue = 150m sharesThank you 🙂
Still cant understand below part:
weighted average number of shares
(number of shares before rights issue is multiplied by the bonus fraction.) what it means? weighted average?
120m shares * (9/12) * (100/96) =93.75m shares
150m shares * (3/12) = 37.5m shares —the unit share price is $1?Rights issues combine the characteristics of issues at full market price and bonus issues. The number of shares before the rights issue must be adjusted for the bonus element in the rights issue. For this, we multiply by the bonus fraction.
weighted average….the shares are weighted on a time basis, i.e., taking account of the date any new shares are issued during the year.
(i am sry…can’t explain more.)
here, we are calculating number of shares, not share price.Trying to understand…
Shares are allocated by time proportion at right issue. And shares should show bonus value within them. Prior to right issue, MV is 100cents per share, then we have 1for4 at 80cents.Total shares should show at 96cents per share. I think I understand now. Thanks.
take a real life example,
person x bought
10 books @ 10
10 books @9 (on sales day)avg cost of 20 books = (100+90)/20=95
but at price 9, how many books could have bought for 100,
10 books *10/9=11.111 books
then total cost of all these books,
11.111*9=99.99999==100
10*9=90
total cost =190
which is same as original cost.in your example,120m *100/96, to get equivalent no. of shares at new price.
and also they consider time apportionment, so, it became,
120m*9/12*100/96.
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