What Are Cum Rights?

Cum rights (or "with rights") allow a shareholder of record to subscribe to a rights offering declared by a company. Owners of shares that have cum rights are able to buy new shares in a 澳洲幸运5官方开奖结果体彩网:secondary offering, typically at a price lower than the current 澳洲幸运5官方开奖结果体彩网:market price of the shares in question. This additional benefit gives such shares of stock an༒ additional theoretical 🗹value.

Cum rights may be contrasted with 澳洲幸运5官方开奖结果体彩网:ex-rights, which are sh🎀ares that no longer have rights&n💃bsp;attached to them.

How Cum Rights Work

Shares that still have rights available to them are referred to as cum rights. Rights, in this context, refer to the opportunity to purchase more shares of a new issue or offering at a given price. Shares of stock that confer such rights are considered to have an 澳洲幸运5官方开奖结果体彩网:additional theoretical value based on the opportunity𝔉 represented by those rights.

Should the company seek to raise capital through a rights offering, owners of cum rights shares can maintain their proportionate ownership and avoid dilution. These rights are short-term, typically 30-45 days, and can be traded in the 澳洲幸运5官方开奖结果体彩网:secondary market. Being able to exercise the🍷 rights and buy shares at a discount gives the rights holder an immediate gain in value. Selling the rights essentially equates to free money for the shareholde🌼r.

The fo༒llowing formula calculates the value of one cum right: 

Value = (market price of the stock - subscription price) / (number of rights needed to purchase one share + 1)

The +1 in the denominator adjusts pending a drop in the market price on the ex-date or the firstꦜ ꦅday the stock trades without rights.

Special Considerations

Cum rights are subject to NYSE Rule 703.03 and Nasdaq Rules 4310(c) and 4320(e) regarding advance notification periods, proposed subscription prices, expiration dates, and other pertinent information for a shareholder to make a decision. 澳洲幸运5官方开奖结果体彩网:The Securities and Exch🌱ange Commission (SEC) requires the filing of Form S-1, a registration statement for the rights offering.

Cum Rights vs. Ex-Rights

A stock that trades with cum rights allows new buyers instead of sellers to collect the rights that have yet to be distributed but are declar♏ed. Cum rights shares are rights that are still available. On the other hand, ex-rights shares have already been transferred, exercised, or have expired. Ex-rights are stock shares that allowed the holder to purchase shares at the previously stated price. 

Shares trading ex-rights have either passed the expiration of the rights offering period, alread🔯y been exercised by the original holder, or have been transferred to another party (thus making the rights no longer possible to trade). In any of these circumstances, the shares no longer provide the holder any special privileges.

Ex-rights shares are worth less than shares that are still trading cum rights (not yet ex-rights); ex-rights shares do not give a shareholder access to a rights offering. 澳洲幸运5官方开奖结果体彩网:Renounceable rights may trade separately, allow🧸ing shareholders to choose to sell their rights rather than exercise them.

Example of Cum Rights 

XYZ Company has 10 million shares of common 澳洲幸运5官方开奖结果体彩网:stock outstanding and is issuing 5 million additional shares through a rights ꦛoffering. The stock is trading at $51 per share, and the rights have a subscription price of $48 per share. Two rights are needed⛎ to purchase one share.

The value of the cum right = ($51 - $48) / (2 + 1) = $1