An investor holds 5 000 shares of VC Ltd, which was bought for R18 per share and is now priced at R20 per share. VC Ltd makes a 2-for-3 rights issue at R15.80. The investor decides to subscribe to the rights issue and purchases a further 3 000 shares. What is the price per share expected to adjust to post the rights issue (the ex-rights price)?
R 18.43
R 17.38
R 17.90
R17.18
First let us find out the number of right shares investor can subscribe:
2-for-3 rights issue.
That means number of right-shares investor can subscribe = (5000 / 3) * 2 = 3,333 shares.
Therefore, investor will get that 3000 shares at R$15.80
The amount to be paid = number of shares subscribed * Price of right-share
= 3000 * 15.80 = R$47,400
The amount paid to get previous 5000 shares = 5000 * R$18 = R$90,000
Therefore, total amount incurred to buy 8000 shares = R$90,000 + R$47,400 = R$137,400
Therefore, adjusted price per share post issue = Total amount incurred to buy 8000 shares / total number of shares.
= R$137,400 / 8000 = R$17.18
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