Dilution Ratio Calculator

What Is Price Dilution Ratio Calculator?

The Price Dilution Ratio Calculator measures how much a company’s share price is expected to fall when new shares are issued at a discount. It focuses on the relationship between the current (cum‑rights) market price, the subscription price for the new shares, and the issue ratio. By computing the theoretical ex‑rights price (TERP) and comparing it to the pre‑issue price, the tool returns a clear dilution percentage. This metric helps investors, founders, and analysts understand the immediate price effect of rights issues, follow‑on offerings, or similar transactions that expand the share count.

About the Price Dilution Ratio Calculator

This calculator implements well‑known rights‑issue arithmetic. It supports both share‑count inputs (original shares and new shares) and ratio inputs (e.g., one‑for‑five). It reports the TERP, the dilution factor, and the percentage drop from the pre‑issue price. For completeness, it also shows the value of a right under cum‑rights and ex‑rights conventions. While the central focus is price dilution, optional ownership fields can display how a holder’s percentage would change if they choose not to subscribe. The output favors transparency: every computed number is backed by a formula so users can validate or reuse the steps in reports.

How to Use this Price Dilution Ratio Calculator

1) Enter the current market price P₀ (cum‑rights). 2) Provide the subscription price S for the new shares. 3) Specify the issue structure as either the original shares N and new shares ΔN, or as a ratio like “1‑for‑5” (one new share for every five old, so m = 5). 4) Submit to compute the TERP, dilution factor, and price dilution ratio. 5) Optionally review ownership impact if not subscribing, plus the indicative value per right.

Examples Using the Price Dilution Ratio Calculator

• Example A (1‑for‑5 at discount): P₀ = 10, S = 7, m = 5 ⇒ TERP = (5×10+7)/6 = 9.5; Price Dilution Ratio = (10−9.5)/10 = 5%.
• Example B (1‑for‑3): P₀ = 12, S = 8, m = 3 ⇒ TERP = (3×12+8)/4 = 11; dilution ≈ 8.33%.
• Example C (1‑for‑2, deeper discount): P₀ = 15, S = 5, m = 2 ⇒ TERP = (2×15+5)/3 ≈ 11.6667; dilution ≈ 22.22%.

Core Formulas (rendered responsively)

Theoretical ex‑rights price using explicit share counts.

Compact TERP when the offer is stated as 1‑for‑m.

Relative price after the issue versus before.

Percentage drop from the pre‑issue price.

Per‑right value before the shares trade ex‑rights.

Per‑right value after the shares trade ex‑rights.

Optional ownership impact for holders who do not participate.

FAQs

Is the price dilution ratio the same as ownership dilution?

No. Price dilution measures the expected price drop to TERP. Ownership dilution measures your percentage stake if you do not subscribe.

What does a larger dilution percentage imply?

A larger percentage indicates a deeper discount and/or a larger issuance, typically leading to a greater immediate reduction in price.

Why use TERP instead of guessing the new price?

TERP is a transparent, weighted‑average benchmark combining old and new capital. It standardizes comparisons across deals and time periods.

How do I read a one‑for‑m ratio?

One‑for‑m means one new share for every m existing shares. For example, one‑for‑5 implies m=5 in the formulas above.

What if subscription price equals the market price?

When S = P₀, TERP equals P₀ and the price dilution ratio is 0%. There is expansion of shares without price drop.

Does the calculator account for fees or expenses?

The core formulas are pre‑fee. If needed, adjust S (net of costs) or add a note to approximate transaction expenses.

Can this help estimate the value of rights received?

Yes. Use the right‑value formulas to estimate the tradable value of a right under cum‑rights or ex‑rights trading conventions.

How should I interpret very small dilution?

Small percentages (e.g., <2%) often indicate pricing close to market or small issuance size; price impact may be negligible in practice.