Democratizing Business Valuation - Ep 7B: How Valuers Determine Rights Issue Prices, TERP & Fairness

In Episode 7b of the Democratizing Business Valuation series, we move beyond the basics of rights issues and explore how valuation professionals determine a fair rights issue price. While many investors focus on discounts and dilution, valuers must assess whether the proposed subscription price is supported by the company's underlying value and whether the rights issue is fair to all shareholders. In this episode, we discuss: ✅ The valuation approaches used for rights issues ✅ Income, Market and Asset-Based valuation methods ✅ Why DCF should include both existing operations and new projects ✅ Determining the fair value per share ✅ Setting an appropriate rights issue discount ✅ Understanding Theoretical Ex-Rights Price (TERP) ✅ Calculating the value of a right ✅ When DLOM and DLOC may or may not apply ✅ Rights issue pricing versus shareholder fairness ✅ Key considerations for valuation consultants, directors and business owners Using practical examples, we demonstrate how a rights issue price should be established using sound valuation principles rather than arbitrary discounts. Most importantly, we introduce TERP as more than just a pricing formula. From a valuation perspective, TERP serves as an important fairness benchmark to assess the impact of a rights issue on existing shareholders. This episode forms the foundation for our next discussion: 📌 Episode 7C: Selecting the Optimal Rights Entitlement Using ROIC and WACC 📌 Episode 7D: Rights Issues, Minority Fairness and Lessons from Recent Singapore Case Law Key Learning Outcome A rights issue price should not be determined solely by management preference. A professional valuer should assess: ✔ Fair value per share ✔ Appropriate subscription discount ✔ Dilution impact ✔ TERP implications ✔ Shareholder fairness considerations ✔ Long-term value creation potential Quote of the Episode "A rights issue price may be mathematically correct, but a valuation professional must also ask whether it produces a fair outcome for all shareholders." #DemocratizingBusinessValuation #RightsIssue #BusinessValuation #DCF #TERP #PrivateCompanyValuation #CorporateFinance #ValuationConsulting #FinancialDueDiligence #EquityValuation #DLOM #DLOC #ShareholderValue #ROIC #WACC #CapitalRaising #SMEValuation #FinanceEducation #SingaporeBusiness #ValuationProfessionals