InvestorQ : Are rights traded in the market and what is the exit route?
natasha Samani made post

Are rights traded in the market and what is the exit route?

Answer
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shrinidhi Rajan answered.
2 years ago


As the name suggests, rights shares are like a call option. The shareholder has the discretion to decide whether they want to opt for the rights or not. Like in the case of options, these rights also trade in the stock market with a unique ISIN number. But, how are rights priced?

Rights Shares Details

Amount

Rights Valuation

Amount

Number of Shares

1000 shares

No. of Rights Shares

400 shares

CMP (A)

Rs.165

Rights Value

Rs.40,000

Current Value

Rs.1,65,000

Post Rights share value

Rs.2,05,000

Rights Issue Price

Rs.100

Cost per 1400 shares (B)

Rs.146.43

Rights Ratio

2:5

Value of Rights (A-B)

Rs.18.57

The rights value of Rs.18.57 will be the base on which the actual market price of the rights will be determined. Investors who do not want to participate in the rights issue can sell their rights in the market at the prevailing price.