Rights Issue Take-Up and Dilution Calculator
Use your offer ratio, cash budget, and an estimated right price to see how many new shares you can fund by selling the rest of your entitlement. The result also shows the theoretical ex-rights price and the ownership you retain if the issue is fully subscribed.
Maximum rights to exercise145
- Theoretical ex-rights price (TERP)
- $48.00
- Theoretical value per right
- $8.00
- Whole-share entitlement
- 250
- Cost to take up all rights
- $10,000.00
- Rights to sell
- 105
- Final share count
- 1,145
- Cash remaining
- $40.00
- Pre-offer ownership retained
- 91.6%
- Ownership dilution
- 8.4%
- Value forfeited if rights lapse
- $2,000.00
Unused rights are valued at the theoretical right value.
Ownership assumes the companywide offer is fully subscribed at the stated ratio.
How to use this calculator
- Enter the cum-rights share price and the offer subscription price from the rights circular.
- Enter the new-for-existing share ratio and the eligible shares you held on the record date.
- Enter the cash you can contribute and the combined cost of subscribing and selling rights.
- Choose a theoretical or observed right price, then compare the maximum take-up with the dilution shown.
How a tail-swallowing rights issue is calculated
A rights issue gives existing shareholders an opportunity to buy new shares in a stated ratio, such as one new share for every four held. A shareholder who cannot fund the full subscription can sell some rights and use the proceeds, together with available cash, to exercise the rest. That approach is often called tail swallowing.
First, the calculator finds the theoretical ex-rights price (TERP), the blended value after the new shares are issued:
TERP = (M × P + N × S) ÷ (M + N)
- P is the cum-rights share price.
- S is the subscription price.
- N new shares are offered for every M existing shares.
The theoretical value of one right is max(0, TERP − S). Your whole-share entitlement is floor(H × N ÷ M), where H is your eligible holding. The floor matters: an offer may have a separate policy for fractions, but this tool does not assume that a fraction can be subscribed.
Let E be the entitlement, B the new cash available, C the transaction costs, and R the selected value of an unused right. The largest number of rights to exercise is:
X = min(E, max(0, floor((B + E × R − C) ÷ (S + R))))
This rearranges the funding condition: subscription payments plus costs must be no greater than cash plus the sale proceeds from the remaining rights. The tool then calculates the final share count and compares it with the larger company share count after a fully subscribed offer.
What changes the result most
The subscription price, right price, cash budget, and transaction costs directly control the number you can exercise. A lower market price for the rights means more rights must be sold to raise the same amount. The offer ratio sets the maximum entitlement and the dilution for a shareholder who does not fully participate.
What this estimate leaves out
TERP is a weighted-average estimate, not a forecast of the ex-rights trading price. It assumes unused rights can be sold at the selected price, the companywide offer is fully subscribed, and each right buys one new share. It does not model entitlement trading deadlines, bid-ask spreads, taxes, foreign exchange, oversubscription privileges, underwriter arrangements, or the issuer's handling of fractional rights.
Worked example
Suppose you own 1,000 shares in a 1-for-4 offer. The cum-rights price is $50, the subscription price is $40, you can contribute $5,000, and there are no transaction costs. The entitlement is 250 new shares. TERP is (4 × 50 + 1 × 40) ÷ 5 = $48, so each theoretical right is worth $8.
Selling 105 rights raises $840. Exercising the other 145 costs $5,800, leaving $40 after adding the $5,000 cash. The final holding is 1,145 shares. Assuming the issue is fully subscribed, the pre-offer ownership retained is (1,145 ÷ 1,000) ÷ 1.25 = 91.6%, so the dilution is 8.4%.
Common questions
How is TERP calculated in a rights issue?
TERP is the weighted average of the existing shares at their cum-rights price and the new shares at their subscription price. For a 1-for-4 issue, four existing shares plus one subscribed share are divided by five. It is a theoretical value that assumes the offer is fully subscribed.
What is tail swallowing in a rights issue?
Tail swallowing means selling enough rights to pay for exercising the remaining rights. It can let a shareholder increase the holding without adding the full subscription amount in cash. Whether it is practical depends on the rights being tradable, their sale price, costs, and the offer deadline.
Can I sell some rights to pay for exercising the rest?
Usually, that is possible only when the rights trade separately and the broker supports the transaction. This calculator estimates the largest whole number of rights you can exercise under the price and cost assumptions you enter. Check the offer document because the steps and cutoff times vary.
How much will my ownership be diluted if I participate only partially?
The calculator compares your post-offer share count with the post-offer company share count, then expresses that result relative to your pre-offer ownership. Full take-up preserves this simplified ownership percentage; partial take-up reduces it. The estimate assumes every other holder takes up the offer in full.
Is the market price of a right the same as its theoretical value?
Not necessarily. The theoretical value follows from the cum-rights price, subscription price, and offer ratio, while the market price is the amount buyers and sellers actually agree during the trading period. Liquidity, time remaining, the underlying share price, and costs can all cause a difference.
What happens if I let my rights expire?
Your holding does not receive the new shares, while the total number of company shares usually rises. The value forfeited here is the estimated value of the full entitlement. Some offers may arrange for lapsed rights to be sold and distribute proceeds, but that is not universal and should not be assumed.