How to Calculate TERP and Rights Issue Dilution

What changes in a rights issue

A rights issue offers eligible holders a chance to buy newly issued shares. Three separate questions follow. What is the weighted price implied by the offer? What does subscribing cost? How much of the prior ownership proportion remains?

A single full-issue scenario gives those questions a common denominator. This guide shows how the answers fit together and why they do not predict the market.

Read the offer terms and prices

N new shares are offered per O old shares. Q is opening shares, P is the cum-rights reference price per old share and S is the cash subscription price per new share. F is the percentage of your pro rata entitlement you model taking up.

Cum-rights means the reference quote still includes the associated rights. The subscription price is the amount paid for one new share under the offer. They are separate prices.

Compare scenarios with the same issuer denominator

Use identical prices and offer terms to compare 0%, partial and full take-up. Only the shareholder’s purchases change. The company-wide share count and amount raised stay fixed in this scenario.

Theoretical ex-rights price and ownership math

TERP weights the reference and subscription prices by O and N. The entitlement is Q × N/O. Multiply it by F/100 to obtain subscribed shares, then multiply by S for subscription cash. Post-issue equity is post-issue shares times TERP. Subtract subscription cash once for the net comparison. Relative ownership retained is 100 × (O + N × F/100)/(O + N).

TERP = (O × P + N × S) / (O + N)

Verified partial and full take-up example

For 100 shares at 10, with 1 new share per 4 held at 6, TERP is 9.20 and the entitlement is 25 shares. At 40% take-up, 10 new shares cost 60. The 110-share position is worth 1,012 at TERP, or 952 net of cash. The modeled change is −48, and relative ownership dilution is 12%.

At full take-up, 125 shares are worth 1,150 and cost 150 in new cash, leaving 1,000 net. At zero take-up, 100 shares are worth 920 and ownership retains 80% of its prior proportion. No sales proceeds are included.

1. Weight 10 and 6 using four old shares and one new share to obtain 9.20.
2. Compute 25 theoretical new shares for the opening position of 100.
3. Take up 40% to buy 10 new shares at a cost of 60.
4. Value 110 shares at 9.20 and subtract 60 to reconcile 952.

Enter consistent prices and take-up

Enter the eligible opening holding you want to model, a positive cum-rights price, subscription price, and the new-for-old offer terms. Enter take-up explicitly from 0 to 100%. Review the cash, share and relative ownership results separately.

Use the offer document’s stated new-for-old relationship. Enter 0 for no take-up. A blank does not have the same meaning. Use a single currency for both prices.

Read dilution as a relative change

Compare equity and cash on the same fully issued basis. Full take-up preserves the prior ownership proportion and the modeled value net of cash. A lower price per share does not by itself describe ownership dilution. The signed price gaps use different share units, and neither is an executable quote.

If a holding represented 2% of an issuer before an offer and the retained proportion is 80%, it would represent 1.6% after the modeled offer. That is 20% relative dilution and a 0.4 percentage-point change. The tool reports relative dilution without needing total issuer shares.

Compare old-share and new-share price gaps

For the example, the opening reference minus TERP is 0.80 per old share. TERP minus subscription price is 3.20 per new share obtainable. The 1-for-4 ratio reconciles those units. Actual rights prices and transferability depend on the offer and market.

A split converts units without a subscription cash payment. See the Stock Split guide for that separate model. Shareholder return over a period can also include dividends and price movements, which are covered in the Total Shareholder Return guide.

What full issuance assumes

The issuer adds all offered shares and receives all subscription cash. This assumption holds even if this shareholder subscribes for less. The model does not identify who fills the remaining offer or infer how a premium-priced offer could be filled.

A premium offer can produce TERP above the original reference under this scenario. For 1-for-4 at 11 with a reference of 10, TERP is 10.20. The signed gaps are −0.20 per old share and −0.80 per new share obtainable. These are arithmetic differences, not a market valuation of an option.

Fractional quantities and numerical limits

Positive shares and cum-rights price and nonnegative subscription price are bounded at 1e9. Ratio terms are integers from 1 to 1,000,000. Decimal inputs allow 12 fractional places and 48 trimmed characters. Exact scaled integer ratios preserve signed gaps before 100-significant-digit conversion. Displayed shares and prices use up to 12 significant figures.

A fractional entitlement stays fractional in the model. The displayed values can round, so small cash differences may require reading the signed net change directly. A zero subscription price produces zero cash outlay.

Avoid unit and cash double counting

Do not use an already ex-rights reference quote, invert the offer terms, treat a premium gap as a negative traded rights quote, or compare equity without accounting for the subscription cash. Match currency and share units before entering prices.

Subtract the modeled payment once from post-issue equity. Do not subtract the opening purchase price as well when comparing with opening equity. Do not add the theoretical per-share price gap as if cash had already been paid.

Read issuer terms across five markets

The USA, UK, Canada, Australia and India settings format USD, GBP, CAD, AUD and INR. UK references may be quoted in pence. Australia often uses the term entitlement offer. SEBI’s investor guide illustrates interpreting the ratio as new shares offered per old shares held.

Examples in the linked issuer documents use different transferability and fractional handling terms. Verify the offer document and account details. The calculator uses none of those jurisdiction-specific rules.

Educational scope and source limits

Educational full-issue model. It does not infer actual allotment, broker rounding, transferability, sales, market prices, taxes, FX, fees, dates or eligibility. It does not recommend subscribing or selling.

Use the primary sources to distinguish a theoretical price from an offer’s eligibility, timetable and actual settlement. This calculation is a simplified comparison for a supplied scenario.

Frequently asked questions

Sources and review

Sources reviewed Nov 7, 2026. Consult current local rules before relying on time-sensitive information.

• SEC EDGAR issuer prospectus
• LSE issuer rights announcement
• B.C. securities instrument
• ASX issuer entitlement offer
• SEBI investor rights issue guide