The price of rights shares is fixed by the company’s board of directors before the issue opens. It is always set below the current market price this discount is what makes the offer attractive to existing shareholders.
The board decides the offer price based on the current market price and how much of a discount is needed to encourage participation, subject to SEBI’s minimum pricing guidelines. The offer price stays fixed for the entire subscription period regardless of market movements.
Once new shares are issued at the lower price, the market price adjusts to reflect the increased share count. This adjusted price is called the ex-rights price and will typically be lower than the pre-announcement market price.
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