Adjustment of Share Price after Bonus and Right Share Issue

Share Price of listed companies are adjusted by Nepal Stock Exchange Limited (NEPSE) every time a listed company offers bonus and right shares. Share prices are adjusted to reflect the addition of shares which is due to the addition of bonus and right shares. Share prices of the companies issuing bonus and right shares are adjusted immediately after the book closure dates. So now the question arises on how these shares price are adjusted after the issuance of bonus and right shares. Lets get into the detail with examples:

1. Bonus Shares :

As for the adjusted price after issuance of bonus share is concerned, it is calculated using the following formula:

Adjusted Price    = Market price before the book closure 

                                           (1+ Bonus Share%)

For example, ABC company offers 25% bonus shares and the closing market price before the book closure date is NPR 200. Adjusted share price of the ABC company after issuance of bonus share shall be:

Adjusted Price    = 200/(1+0.25)

                              = 200/1.25

                              = 160

2. Right Shares :

Adjusted price of shares in case of right share issuance shall be calculated using the following formula:

Adjusted Price    = Market price+(subscription price per unit *right share%)/(1+right share%)

For example, ABC company offers 25% right share at issue price of NPR 100 per unit. Closing Market price before the book closure date is NPR 200. Adjusted share price of the ABC company after issuance of right share shall be:

Adjusted Price    =200+(100*0.25)/(1+0.25)

                              =(200+25)/1.25

                              =180