Bonus and Rights Issues Exercise on QL

[1] How many new shares an investor has if he possessed 5,000 shares of QL before the ex-date and he held the shares after the whole exercise?
New Shares from Bonus Issue = 5,000/10*3 = 1,500
New Shares from Right Issue = 5,000/10*2 = 1,000
Total New Shares = 1,500 + 1,000 = 2,500

[2] What is the fair value of QL after the ex-date.

 

Adjusted Price, Pa= (P*Y+X*Y*Z+W*X*Y*K)/(Y+X*Y+Y*B+X*Y*W)
= (3.95 * 5000 + 0.2 * 5000 * 1.8 + 0 * 0.2 * 5000 * 0)/(5000 + 0.2 * 5000 + 5000 * 0.3 + 0.2 * 5000 * 0)
Pa = 2.873

[3] What is the fair value of each renounceable Rights when it was trading during the one week duration after the ex-date but before the expiry of the exercise date?

Fair Value of Rights, R = Ex-Price – Subscription Price = Pa - Z  = 2.874 - 1.8 = 1.073


Click here for the calculation worksheet.

Referenes:-

• Bonus, Rights Issues and Free Warrants and Price Adjustment