Ex-Rights Date
Quick Definition
The first trading day on which new buyers of a stock are no longer entitled to participate in a rights offering.
Key Takeaways
- The ex-rights date is when shares trade without the right to participate in a discounted rights offering.
- The stock price typically adjusts downward by the theoretical value of the right.
- Rights can often be traded on the open market if the shareholder doesn't want to exercise them.
What Is Ex-Rights Date?
The ex-rights date is the date on which shares begin trading without the attached rights to purchase additional shares in a rights offering. A rights offering (or rights issue) allows existing shareholders to buy new shares at a discount to the market price, in proportion to their current holdings. To receive these rights, an investor must own shares before the ex-rights date. After the ex-rights date, the stock price typically drops by approximately the theoretical value of the right, similar to how prices adjust on the ex-dividend date. Rights can often be traded on the open market, so shareholders who don't want to exercise them can sell the rights for their market value. The ex-rights date is set by the exchange, typically one business day before the record date under T+1 settlement rules.
Ex-Rights Date Example
- 1A company announces a rights offering at $15 per share (market price $20). Investors must own shares before the ex-rights date to participate.
- 2After the ex-rights date, the stock drops from $20 to approximately $18.75 to reflect the dilution from new shares.
Related Terms
Ex-Dividend Date
The date on which a stock begins trading without the right to receive the upcoming dividend payment.
Dividend Record Date
The date set by a company to determine which shareholders are eligible to receive an upcoming dividend.
Dilution (Share Dilution)
The reduction in existing shareholders' ownership percentage when a company issues new shares, reducing earnings per share and book value per share.
Stock
A security representing ownership in a corporation, entitling the holder to a share of profits and voting rights.
Initial Public Offering (IPO)
The first sale of a company's stock to the public, transitioning it from private to publicly traded.
NASDAQ
The National Association of Securities Dealers Automated Quotations — the second-largest stock exchange globally, known for its concentration of technology and growth companies.
Expand Your Financial Vocabulary
Explore 130+ financial terms with definitions, examples, and formulas
Browse Stock Market Terms