Nuplex Rights Issue Calculator
Nuplex (NPX) is an NZE listed equity. On Friday 20th March they announced a 7 for 1 rights-issue with the issue price being 23 cents per share. The shares will start trading ex-rights on 26 March and the rights will be tradable from the 2nd April.
One of the first questions that share-holders will be asking themselves is how much are these tradeable rights worth, and what will we expect the Nuplex share-price to drop to on the 26th March. The following calculator will work this out for you. I have a set a default figure of 51c (NZD) since that was the NZX closing price on 20th March. You can use this to calculate the value of the rights going forward.
It is worth noting that the underlying assumption of this formula is that the conversion of a single pre-rights Nuplex share into a share plus 7 rights doesn't alter the proportion of the company that a share-holder owns. The only change that occurred on Friday was information - the intrinsic value of the underlying assets or the value of a share in those assets hasn't changed due to the rights issue. Therefore, even though I am not a Nuplex share-holder, with the sharp drop in share-price on Friday, I felt it would be prudent to analyse the company.
* Note that the above calculator does not consider First-Capital's right to call for Nuplex to issue 15% additional shares at 23 cents per share. This is an actual loss to the existing share-holders wealth.
4 Comments
Other links to this post
RSS feed for comments on this post. TrackBack URI
By Kelvin Hartnall, March 23, 2009 @ 4:33 pm
I have just modified the default price on the calculator to be 60c to reflect the opening share price today, Tuesday March 24th.
[Reply]
By Greg Day, March 24, 2009 @ 3:57 am
Thanks! I was wondering exactly what the impact of a rights issue would be, and suddenly its all there! Have you analysed further with regards to Nuplex? And … did you buy shares?
[Reply]
By Kelvin Hartnall, March 24, 2009 @ 5:34 am
Yes I did some further analysis of Nuplex and I can disclose that we happily purchased shares at 51c per share
[Reply]
By Kelvin Hartnall, March 25, 2009 @ 4:55 pm
Default price of the calculator has been changed to $1.00 to reflect the current share price.
[Reply]