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Compton plc has announced a 1 for 4 rights issue at subscription price of $2.50. The current cum-rights price of the shares is $4.10
What is the new ex-rights market value of the shares?
I don’t understand why we should use the TERP formula to calculate this figure when we have the cumulative rights price and we have to calculate the ex rights market value?
I remember for ex dividend price, we would deduct the dividend to be paid from cumulative dividend price but I’m confused with what ex rights and cum rights price is, please let me know, thank you in advance!!The cum-rights price is the market price of the shares before the rights issue, while the ex-rights price is the market price after the rights issue has been accounted for.
The TERP helps to determine the new market value of the shares after the rights issue, similar to how the ex-dividend price is calculated by deducting the dividend from the cum-dividend price.
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