What Is Right Share Issue In Nepal?
Right Share Issue In Nepal With Example
Example of a Rights Issue
Let’s say an you have 100 shares of Nabil bank (NABIL) and the shares of Nabil Bank are trading at NPR 1335 each. The company announces a rights issue in the ratio of 2 for 4 with a discounted price of NPR 1000 each. If you are confused about this, then here is the simple explanation. i.e., Each investor holding 4 shares will be eligible to buy 2 new shares. It means that for every 4 shares (at NPR 1335 each) held by an existing shareholder, the company will offer 2 shares at a discounted price of NPR 1000.
Number of right shares to be received by you if you have 100 shares of Nabil bank = (100 x 2/4) = 50
Price that you should pay to buy rights shares = 50 shares x 1000 = 50000
Some of the disadvantage of the Right issue is that the issue would result in dilution in the value of holdings of the existing shareholders. It also increase the number of shares of a company that means the profit need to be shared with extra shares impacting earning per share (EPS).
