Theoretical Value of a Right of Subscription

• RS =  Tu (Q-E-D)
• A + N

Where:

• RS = Theoretical value of rights of subscription
• N   = Number of new shares
• Q   = Quotation value of old shares
• D  = Difference of dividends
• E  = Emission cost of each new share
• A  = Number of old shares

Example: Supposing that a company does a capital expansion in the following conditions:

Proportion (N): 2 (One new share for each two old ones)

Emission value (E): 150% in relation to the nominal value, that is of $500 per share. Emission value= 750 per share

Quotation before the expansion (Q): 250% that is $1,250. = Per share

The theoretical value of the right will be of:

RS = 1 (1250 – 750)  = $167. =
              2 + 1

In spite of all, the offer and demand will be in last term the one who will determine the price of the rights of subscription, due that these are traded at the exchange market in their price vary from day to day.