Opening Price Range of Newly Listed Shares
Opening price range of newly listed shares is determined on the basis of Net Worth Per Share of the company. Net worth per share of the latest audited financial statements is taken as basis for setting the opening price range. The lowest price is the net worth per share itself and the highest price is thrice the net worth per share of the company.
Before illustrating example of how opening price range are set in Nepal Stock Exchange limited let us understand what is net worth per share and how it is calculated.
In a simple language, net worth is a quantitative concept that measure the value of an entity. It provides a snapshot of entity's current financial position. Positive and increasing net worth indicates a good financial health while decreasing and negative net worth indicates a cause of concern.
Net worth is calculated simply using the formula :
Net worth = Total Assets - Total Liabilities
OR
Shareholders Fund
Net worth per share = Net worth/Total no of outstanding shares.
Now, lets illustrate how opening price range of newly listed shares is determined with the example of recently listed share in Nepse i.e. Reliance Life Insurance Limited.
As per the audited Statement of financial position of the company for FY 2075/76 as in the picture :
A. Total Assets = NPR 2,174,962,744
B. Total Liabilities = NPR 593,360,919
C. Shareholders Fund = NPR 1,581,601,825
D. Outstanding Shares = 14,700,000
E. Net Worth(A-B) = NPR 1,581,601,825, which is also the total shareholders fund.
F. Net Worth Per Share (C/D) = NPR 107.59
The lowest price shall be equal to the net worth per share of the company i.e.NPR 107.59. Highest price shall be thrice of the net worth per share of the company i.e. NPR 322.77 (107.59*3). So the opening price range of the company was set between NPR 107.59 and 322.77.
This is how the opening price range of newly listed share is set in Nepal Stock Exchange Limited.
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