Ex-rights definition
/What is Ex-Rights?
Ex-rights refers to a share of stock that is selling without any associated rights to buy additional shares being offered by the issuer. Because these rights have value, the ex-rights shares sell for a lower price than would shares that have the rights associated with them. The shares may be designated as ex-rights because the rights have expired, they have been exercised, or they have been transferred to another investor.
How to Calculate Ex-Rights Price
To calculate the ex-rights price of a share, combine the current market value of all shares in existence prior to the rights issue and the funds raised from the sale of rights. Then divide this total by the number of shares outstanding after the right issue has been completed. The formula is as follows:
(Current market value of shares prior to rights issuance + Funds raised from sale of rights) ÷ Current shares outstanding
= Ex-rights price
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FAQs
What is the Difference Between Cum-Rights and Ex-Rights?
Cum-rights means that a stock is trading with the rights attached, so buyers of the stock before the ex-rights date are entitled to receive the rights in a rights offering. Ex-rights, on the other hand, refers to shares trading without those rights, meaning new buyers after the ex-rights date are not eligible to participate. The key difference is that cum-rights shares carry the privilege of the rights issue, while ex-rights shares do not.