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Investments glossary

Theoretical Value (Of A Right)


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JACK NICHOLSON: My point of view, while extremely cogent, is unpopular. LOS ANGELES TIMES: Which is? JACK NICHOLSON: That the repressive nature of the legalities vis-a-vis drugs are destroying the legal system and corrupting the police system. LOS ANGELES TIMES: Let\'s talk about acting for a minute.

— Jack Nicholson

The theoretical value (of a right) is the value of a subscription right. During the period of time when a new rights offering is announced up until three days before the subscription rights expire (known as the cum rights period), the value of the right is specific and can easily be calculated. To calculate the value of a right during the window in which it is effective, and investor must be told the subscription price and the number of rights required to buy one share of stock. With that information the value of the right can be calculated using the following formula:


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