Bhavikk Shah on Rights Issue - Valuation- Network 18

HI FRIENDS,
There are many companies coming with an Rights issue - some may subscribe to it and some may let it go and some may RENOUNCE it (i.e selling the right shares offered to you to some one else ) but One should always look at the value of its rights before thinking to renouncing it - here I have tried to explained how to determine your value of your rights -

NOW NETWORK 18 announced -

307 new sh for every 50 held.

Market Value of Each share (CMP) - 30.45

New share priced at (Face value + premium) - Rs.30

SO,

Market Value of 50 old shares = Rs.1522.50
+
Price of New 307 shares = Rs.9210
TOTAL PRICE FOR 357 shares = Rs. 10,732.50

AVERAGE PRICE OF 1 Sh comes to Rs. 30.063

Therefore,
VALUE OF YOUR RIGHT = MARKET VALUE - AVG PRICE
= 30.45 - 30.063
VALUE OF YOUR RIGHT = 0.38.

Now this will keep on changing as and when the closure date of rights comes nearer..

GUYS DO have your home work done before taking any decision ...

Bhavik Shah
http://www.bhavikkshah.blogspot.in/