Theoretical ex-rights price

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Revision as of 10:46, 16 March 2014 by Doug Williamson (Talk | contribs) (Mention alternative abbreviation to TERP. Explain why TERPS is normally lower than pre-issue share price.)

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The theoretical price to which a company's shares are expected to change, following a rights issue.

The theoretical price is based on the assumption that the total value of the company's equity will increase by exactly the amount of cash subscribed by the shareholders, and neither more nor less.

The theoretical ex-rights price will generally be lower than the market price of the company's shares before the rights issue, because the rights shares are normally issued at a discount to the current market price.

Sometimes abbreviated to TERP, rather than TERPS.

Also known as the Theoretical post-rights price.

See also