How to Calculate Theoretical Ex-Rights Price (TERP)

Usually, the share price will be changed after conducting the right issue. The new share price after the right issue is known as the theoretical ex-rights price (also known as ex-right price or TERP). It is calculated by sum the market value of existing shares and proceeds of right issues divided by the total number of shares after the right issue.

Theoretical Ex-Rights Price (TERP) = [ Market Value of Shares Already Issued + Proceeds of New Right Issue ] / The Total number of Shares After Right Issue

Formula to Calculate Theoretical Ex-Rights Price (TERP)

Usually, the share price will be decreased than the market price which was available before the right issue, but not less than the right issue subscription (discounted) share price.

Share Price Before Right Issue and After Right Issue

Value of a Right = Theoretical Ex-Rights Price – Right Issue Subscription (Discounted) Share Price

Learn more about Right Issue of Shares,

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