Term · Capital Measures & Financing
TERP (Theoretical Ex-Rights Price)
In briefThe TERP is the theoretical share price after a rights issue that prices in the dilution from new shares issued at a discount. It serves as a reference for the value of the subscription right and separates the accounting dilution effect from a genuine price move.
Definition
The TERP is the theoretical share price immediately after a rights issue that prices in the dilutive effect of the new shares, usually issued at a discount. It serves as a calculated reference to determine the value of a subscription right and the effective issue discount. The actual price can deviate from it.
How it is calculated
Formula. TERP = (market value of old shares + issue proceeds of new shares) ÷ (number of old + new shares)
Why it matters for small caps
For small-cap capital increases with a high discount, a mere price comparison distorts the actual performance; the TERP separates dilution from a genuine price move.
Common misreadings
- The price drop on the ex-date is interpreted as a price loss, even though it only reflects the calculated TERP adjustment.
In the process
Frequently asked
What is the TERP used for?
As a calculated reference to determine the value of a subscription right and the effective issue discount.
Why does the price fall on the ex-date?
The price adjusts to the TERP because the new shares are added at a discount; this is calculated dilution, not a genuine loss.
Does the TERP equal the actual price?
Only in theory. Supply, demand and market sentiment lead to deviations in practice.
Related terms
Education only, not investment advice. Ranges and thresholds are didactic orientation values, not an official standard.