How far a stock is marked down on the ex-rights date of a shareholder-allocation rights offering comes down to two numbers: the new shares allocated per existing share, and the discount applied to the issue price. The theoretical drop is allocation ratio × discount rate ÷ (1 + allocation ratio). The size of the raise and what the money will be spent on do not enter the equation.
The offering Samsung Biologics announced on 28 August is a clean case to plug into that formula. According to Financial News, the structure is shareholder allocation followed by a public offering of forfeited shares, with 2.27 million new shares at an expected issue price of 1,322,000 won each. Of the 3.0009 trillion won raised, 2.7062 trillion goes toward acquiring the Polypeptide Group and 294.8 billion toward expanding the second bio campus in Songdo. Minju Shinmun reported a 15% discount, a capital increase ratio of roughly 4.9%, and an allocation of 0.0392737657 new shares per existing share.
Why two numbers are enough
A shareholder-allocation offering gives subscription rights only to those on the shareholder register as of the allocation record date. On the trading day before that date, the exchange resets the price downward — that reset is the ex-rights adjustment. Anyone buying after the record date has no claim on the discounted new shares, so the value of that claim is stripped out in advance.
The theoretical ex-rights price is a weighted average of the cum-rights close and the issue price, weighted by the allocation ratio.
theoretical price = (cum-rights close + issue price × allocation ratio) ÷ (1 + allocation ratio)
Substitute close × (1 − discount) for the issue price and the closing price cancels out entirely. What remains is the drop formula.
drop = allocation ratio × discount rate ÷ (1 + allocation ratio)
The percentage is the same whether the stock trades at 50,000 won or 1.55 million. The same algebra explains why a bonus issue's ex-rights adjustment depends on the allocation ratio alone: with an issue price of zero, the discount is 100%, and the drop collapses to ratio ÷ (1 + ratio). That is why a 30% bonus issue knocks 23% off the reference price.
| Allocation per share | Discount (%) | Theoretical drop (%) |
|---|---|---|
| 0.039 | 15 | 0.57 |
| 0.10 | 15 | 1.36 |
| 0.20 | 20 | 3.33 |
| 0.50 | 20 | 6.67 |
| 1.00 | 25 | 12.50 |
| 1.00 | 30 | 15.00 |
The asymmetry between the two variables is what the table shows. Doubling the discount from 15% to 30% doubles the drop exactly. Raising the allocation ratio also enlarges the denominator, so its effect flattens out. A small offering can carry a steep discount without much ex-rights damage; a one-for-one issue wipes out 10% even at a modest 20% discount.
Samsung Biologics' terms give 0.57%
The reference price the company used can be worked backward from the expected issue price. Since 1,322,000 won is what remains after a 15% discount, the reference price was 1,322,000 ÷ 0.85 = 1,555,294 won.
Feeding that into the formula gives an ex-rights reference of (1,555,294 + 1,322,000 × 0.0392737657) ÷ 1.0392737657 = 1,546,479 won. The adjustment is 8,815 won, or 0.57% — identical to what the shorthand formula returns from the ratio and the discount alone.
The adjustment is small relative to a three-trillion-won raise because the capital increase ratio is only 4.9%. Dilution is bounded for the same reason. Unlike a third-party allotment, where existing holders watch their stake shrink with no chance to subscribe, shareholder allocation preserves the ownership percentage of anyone who takes up the full allotment.
The practical question is how much cash that takes. The allotment equals holdings times the allocation ratio, with fractions below one share customarily truncated. On top of that, oversubscription is permitted up to 20% of the allotted shares.
| Shares held | Shares allotted | Oversubscription cap | Base subscription cost (won) | Maximum with oversubscription (won) |
|---|---|---|---|---|
| 100 | 3 | 0 | 3,966,000 | 3,966,000 |
| 500 | 19 | 3 | 25,118,000 | 29,084,000 |
| 1,000 | 39 | 7 | 51,558,000 | 60,812,000 |
| 5,000 | 196 | 39 | 259,112,000 | 310,670,000 |
Each figure multiplies the share count by the expected issue price of 1,322,000 won. A holder of 100 shares gets three shares, and an oversubscription cap of 0.6 shares truncates to zero — the mechanism simply does not operate at the bottom of the register. A holder of 1,000 shares needs 60.8 million won to take the full 46 shares. Since the final issue price is set again shortly before the subscription period, these amounts are a baseline rather than a ceiling.
What is lost by not subscribing
Once the price has been marked down, skipping the subscription turns that markdown into an unrecovered loss. At 0.039 and 15% it is 0.57% and hardly matters. At a one-for-one ratio with a 30% discount it is 15%.
That is why the Capital Markets Act requires companies running shareholder-allocation offerings to issue subscription warrants. As Easy Law, the government legal information service sets out, the basis is Article 165-6(3). A shareholder without the cash or the inclination to subscribe can sell the warrant and convert the right into money. Warrants typically list for about five trading days roughly two weeks ahead of the subscription window; in Medipost's 2023 offering they traded from 16 to 23 October.
Shares left unsubscribed by existing holders become forfeited shares. Ilgan NTN reports that shareholders may oversubscribe up to 20% of their allotment, and forfeited shares are distributed in proportion to those oversubscription requests. Whatever remains moves to a general public offering, priced off the volume-weighted average of the third to fifth trading days before subscription with a discount of up to 30%. Stock offered to existing holders at 15% off can end up cheaper in the public tranche.
One more piece is easy to miss: the employee stock ownership association. Per the schedule compiled by Newsway, 20% of the new shares are set aside for the association and the remaining 80% go to existing shareholders. Multiplying the 4.904% capital increase ratio by 0.8 is what produces the 0.0393 per-share allocation. Reading the headline ratio alone overstates the allotment by a fifth.
An ex-rights adjustment is not a verdict on the company. It is arithmetic driven by two contract terms: the allocation ratio and the discount.
What to watch
The theoretical price is only a starting line. The opening print on the ex-rights day is set by supply and demand, and by how the market reads the use of proceeds — it can open above or below the theoretical level. The calculation breaks in one clear case: if a corrective filing changes the allocation ratio or the issue price, the drop changes with it.
- Final issue price — the expected price is a baseline; compare it against the figure fixed just before subscription
- Allocation per share — not the headline capital increase ratio, but the figure net of the employee association tranche, determines the cash required
- Warrant trading window — if you do not plan to subscribe, missing this window destroys the value of the right
- Truncation of the oversubscription cap — a small allotment drops the 20% ceiling to zero shares
- Discount on the public tranche — up to 30% is permitted, potentially below what existing holders paid
- Timing of the spending — acquisition consideration and capital expenditure hit the income statement on very different schedules
Sources
- Samsung Biologics announces 3 trillion won rights offering — Financial News
- Samsung Biologics approves rights offering to fund Polypeptide acquisition — Minju Shinmun
- Samsung Biologics moves to cement global No.1 position with rights offering — Newsway
- Forfeited shares allotted in proportion to oversubscription requests — Ilgan NTN
- Understanding share issuance and subscription — Easy Law