The ex-rights reference price for a Korean musang jeungja (bonus share issue, where existing holders receive free new shares) is simply the previous day's close divided by (1 + the bonus ratio). In a 1:8 issue — eight free shares for every one held — the share count becomes nine times larger, so the reference price becomes one ninth. Notus went through exactly this in 2022: a prior close of 69,500 won opened the next session at 7,730 won.
The quote board shows what looks like an 89% collapse in a single day. But on that same day the number of shares in the account multiplies by nine. Multiply the two together and the position is worth what it was worth before. The reason "it got cut in half" keeps coming up is that the price adjustment and the share increase never appear on the same screen at the same moment.
One formula covers the whole thing
Bizwatch states the arithmetic as (prior close x shares before) / shares after. Ajunews writes the same thing as reference price / (1 + bonus ratio). The denominator is 2 for a 1:1 issue and 9 for a 1:8 issue.
Run Notus through it: 69,500 / 9 = 7,722 won. The published reference price was 7,730 won. Those 8 won are not a calculation error — the raw figure gets snapped to the tick size that applies at that price level. When estimating a reference price in advance, allow for roughly one tick of drift.
Here is a 60,000 won stock, 100 shares held (6,000,000 won), pushed through several bonus ratios.
| Bonus ratio | Share count multiple | Ex-rights price (KRW) | Shares held | Position value (KRW) |
|---|---|---|---|---|
| 1:0.5 | 1.5x | 40,000 | 150 | 6,000,000 |
| 1:1 | 2x | 30,000 | 200 | 6,000,000 |
| 1:2 | 3x | 20,000 | 300 | 6,000,000 |
| 1:3 | 4x | 15,000 | 400 | 6,000,000 |
| 1:8 | 9x | 6,666 | 900 | 5,999,400 |
The right-hand column lands on 6 million won every time. The 1:8 row is short by 6,000 won only because 60,000 does not divide evenly by nine; tick rounding often pushes it back up. The higher the ratio, the more dramatic the on-screen drop — and the more completely irrelevant it is to the account balance.
An ex-rights adjustment does not cut the price. It redraws the scale to match a larger number of shares.
How late can you buy and still get the free shares?
Everything hangs on the record date for the new-share allotment. You have to be on the shareholder register that day. For Notus the record date was 2 June and the ex-rights date was 31 May — the ex-rights date falls on the trading day immediately before the record date.
Layered on top is Korea's T+2 settlement cycle. To be registered on the record date, the trade has to be executed two business days earlier — which is the session right before the ex-rights date. In plain terms: buy by the close of the day before the ex-rights date and you get the new shares; buy on the ex-rights date itself and you do not. It is the same backward count used for working out a dividend ex-date.
Buying on the ex-rights date is not a worse deal. Trading opens that day at the already-reduced reference price, so you forgo the free shares but pay less per share. The same amount of money buys the same stake either way.
Why a drop to one ninth is not a loss
A bonus issue is not funded with new money. It moves capital surplus that was already sitting in equity over into the paid-in capital account. Bizwatch describes it as shifting cash from the left pocket to the right one. The company's assets and its earnings are untouched.
What changes is only how many shares divide those earnings. Nine times the shares means earnings per share falls to one ninth. The ratio of price to underlying value is identical before and after — which is why Bizwatch calls the effect an optical illusion of cheapness. Running the mechanism in reverse, cancelling treasury shares pushes EPS up. Same axis, opposite direction.
Rights issues use a different number
A yusang jeungja (rights issue, where new shares are sold for cash) adds one more input. Ajunews notes that its ex-rights price reflects the existing price, the subscription price of the new shares, and the allotment ratio. Because real cash enters the company, that amount is added to the numerator before dividing by the enlarged share count.
Hold the prior close at 10,000 won and the ratio at 20%, and the gap is obvious.
| Type | Inputs to the calculation | Ex-rights price (KRW) | vs prior close |
|---|---|---|---|
| Bonus issue, 20% | prior close, ratio | 8,333 | -16.7% |
| Rights issue, 20% (sub. price 8,000) | prior close, subscription price, ratio | 9,667 | -3.3% |
| Rights issue, 20% (sub. price 5,000) | prior close, subscription price, ratio | 9,167 | -8.3% |
The cheaper the new shares are priced, the further the reference price falls. A rights issue also differs in that a holder who declines to put up cash is genuinely diluted. In the T&R Biofab case cited by Ajunews, the subscription price was set at 1,779 won and the stock fell 6.54% on the ex-rights day. Converting dilution into a share count follows the same logic as the dilution math for convertible and warrant bonds.
The expert view quoted by Ajunews lands in the same place: an ex-rights adjustment is a technical price change and should not be read as a fall in corporate value.
What to watch
- Record date and ex-rights date — both appear in the disclosure. The session before the ex-rights date is the last day to buy in.
- Total shares outstanding after the issue — this is the denominator when you check the reference price yourself. If your division lands more than a tick away from the published figure, you read the ratio wrong.
- Source of the issue — capital surplus or retained earnings. Either way, no new cash reaches the company.
- Listing date for the new shares — allotted shares cannot be sold until they land in the account. Check how many days sit between the ex-rights date and listing.
- Turnover after the adjustment — a lower per-share price can pull in more trading. That extra volume still has nothing to do with earnings.