When a stock opens 23% below the previous close on a bonus-issue ex-rights day, nothing has fallen. The price is being divided in advance by the number of shares about to exist, and there is exactly one formula: ex-rights base price = cum-rights close ÷ (1 + allotment ratio). At 0.3 new shares per share, you divide by 1.3, so the base price lands at 76.9% of the close — a drop of 23.1%.
Real numbers confirm it. Alteogen approved a 30% bonus issue allotting 0.3 new shares per existing share, and the base price for the August 5 ex-rights date was disclosed at 267,000 won. The August 4 close — the last cum-rights session — was 347,000 won. What sits between those two numbers is arithmetic, not market judgment.
Where 267,000 won comes from
Divide 347,000 by 1.3 and you get 266,923. Round that up to the tick size applicable at this price level (100 won) and you land on exactly 267,000. The disclosed figure matches to the last digit, which tells you the exchange is not choosing a number — it is publishing the output of a rule.
The rule is cited in the filing itself. The ex-rights base price notice issued by the Korea Exchange names Article 30 of the KOSPI Market Business Regulation Enforcement Rules as its basis and applies the formula in the attached schedule. KOSDAQ issues follow the corresponding provision. Note that this base price is not the opening price: the opening auction on ex-rights day starts from this reference and settles wherever bids and offers meet.
The sequence runs like this. The board resolves the bonus issue and discloses the allotment ratio and the new-share record date. The ex-rights date falls two business days before that record date, because Korean equities settle on T+2. Alteogen's record date was August 6, so a buyer had to hold by August 4 to receive new shares; anyone buying on August 5 got none. That is the day the right detaches, and the base price strips out exactly the value of that right.
How much the ratio cuts
Because the formula is a single division, the decline rate depends only on the allotment ratio — the share price is irrelevant. For ratio r, the base price multiplier is 1÷(1+r) and the decline is 1−1÷(1+r).
| Allotment ratio (new shares per share) | Base price multiplier | Decline (%) | Base price if close is 10,000 won |
|---|---|---|---|
| 0.1 (10%) | 0.9091 | 9.09 | 9,091 |
| 0.2 (20%) | 0.8333 | 16.67 | 8,333 |
| 0.3 (30%) | 0.7692 | 23.08 | 7,692 |
| 0.5 (50%) | 0.6667 | 33.33 | 6,667 |
| 1.0 (100%) | 0.5000 | 50.00 | 5,000 |
| 2.0 (200%) | 0.3333 | 66.67 | 3,333 |
| 3.0 (300%) | 0.2500 | 75.00 | 2,500 |
The decline does not scale linearly with the ratio. A 100% bonus issue halves the base price; a 300% issue cuts it to a quarter. That is why a 300% ex-rights screen looks like a 75% crash to anyone seeing one for the first time. The decline tracks the share of pre-issue stock in the post-issue total, not the ratio itself.
What happens to 100 shares
Plugging the Alteogen figures into a holding of 100 shares makes the character of the adjustment obvious.
| Point in time | Shares held | Price applied (won) | Position value (won) |
|---|---|---|---|
| August 4 close (cum-rights) | 100 | 347,000 | 34,700,000 |
| Theoretical ex-rights (before rounding) | 130 | 266,923 | 34,700,000 |
| Disclosed base price applied | 130 | 267,000 | 34,710,000 |
| As displayed before new shares list | 100 | 267,000 | 26,700,000 |
The 10,000-won gap in the third row is rounding change from the tick-size adjustment. In theory an ex-rights adjustment moves wealth by zero.
The fourth row is the real problem. The price adjusts on ex-rights day, but the 30 new shares are not in the account yet. Alteogen's new shares were scheduled to list on August 26. For roughly three weeks the account shows 100 shares at a price 23% lower — a position that reads as 34.7 million won shrinking to 26.7 million, an apparent loss of 8 million won. Nothing has gone anywhere; the numbers reconcile the day the 30 shares are credited.
The drop on ex-rights day is division, not price action — and the division is not finished until the new shares reach the account.
Why rights issues use a different formula
A bonus issue brings no cash into the company. Capital surplus is reclassified as paid-in capital and shares are printed, so there is nothing to add to the numerator. A rights issue does bring in subscription money, and that money has to be added.
The rights-issue base price is (cum-rights close × existing shares + subscription price × new shares) ÷ post-issue shares, which simplifies to (close + P×r) ÷ (1+r) for subscription price P and ratio r. The two methods diverge sharply at the same ratio.
| Type | Cum-rights close (won) | Ratio | Subscription price (won) | Base price (won) | Decline (%) |
|---|---|---|---|---|---|
| Bonus issue | 10,000 | 0.2 | — | 8,333 | 16.67 |
| Rights issue (20% discount) | 10,000 | 0.2 | 8,000 | 9,667 | 3.33 |
| Rights issue (30% discount) | 10,000 | 0.2 | 7,000 | 9,500 | 5.00 |
| Rights issue (priced at market) | 10,000 | 0.2 | 10,000 | 10,000 | 0.00 |
Same 20% expansion, yet the bonus issue drops 16.67% while the rights issues drop 3–5%, and pricing new shares at market produces no adjustment at all. The smaller rights-issue haircut is not a favor to shareholders — it exists because shareholders pay for the new shares. Bonus shares are free, so the full value comes out of the price; rights shares are paid for, so only the discount comes out. The same arithmetic drives how a discounted third-party rights issue dilutes existing holders.
Why the chart suddenly looks different
After an ex-rights date, the historical chart moves too. At a 0.3 ratio, every bar before the ex-rights day is redrawn at its price divided by 1.3. That is the adjusted-price convention, and without it the chart would carry a 23% cliff that makes trend reading impossible.
It also creates three illusions. First, past highs shrink, so the stock can look like it is printing new highs when it is not. Second, your cost basis is adjusted in the account but different screens refresh at different times, so the return figure can disagree with itself for a while. Third, if the raw ex-rights candle survives anywhere in your data, the stock shows up in crash screens with no news attached. Anyone running a sharp-decline filter needs one more condition to exclude ex-rights days.
What to watch
A bonus issue changes neither cash flow nor earnings. It shifts figures between capital accounts, and every holder's ownership percentage stays put. Trading still clusters around these dates, so the following checks build the frame for reading one.
- Allotment ratio and record date — the ex-rights date is two business days earlier. Buying on the record date itself confers no right
- Scheduled listing date for the new shares — the window from ex-rights day to this date is when the account understates the position. For Alteogen that was August 5 to August 26, about three weeks
- Funding source — share premium or retained earnings. Either way it is an internal reclassification with no cash entering the company
- Post-issue float and unit price — a lower per-share price improves accessibility, but market capitalization and per-share metrics are recalculated automatically
- Whether your chart is adjusted — if past highs and moving averages have been rescaled and you do not know it, breakout and crossover signals read wrong
Here is the condition under which this framing fails: the base price is theoretical. The open and close on ex-rights day are set by supply and demand. Trading above the base price is the familiar gap-fill pattern; trading below it suggests something unrelated to the issue is mixed in. Division only explains the starting line.