## Basic EPS When There Is a Rights Issue
A rights issue contains two economic elements that must be separated before computing the Weighted Average Number of Equity Shares (WANES):
1. Shares issued for consideration — shares sold at the ex-rights price (real cash-raising shares).
2. Bonus element (free shares) — shares given without receiving full market value; treated as if they existed from the beginning of the year (no time-weighting).
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### Step 1 — Calculate the Ex-Rights Price
The ex-rights price is the theoretical fair value of every share after the rights issue settles.
$$\text{Ex-Rights Price} = \frac{(\text{Shares before issue} \times \text{Market Price}) + \text{Cash received in Rights Issue}}{\text{Total shares after Rights Issue}}$$
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### Step 2 — Bifurcate the Rights Shares
$$\text{Shares issued for consideration} = \frac{\text{Funds raised}}{\text{Ex-Rights Price}}$$
$$\text{Bonus shares} = \text{Total rights shares} - \text{Shares issued for consideration}$$
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### Step 3 — Build the WANES
| Component | Time-weight applied? |
|---|---|
| Opening shares | Yes — weighted for the full period they were outstanding |
| Bonus shares (from rights) | No — assumed outstanding from the start of the year |
| Shares issued for consideration | Yes — weighted from the actual issue date |
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### Step 4 — Restate the Prior Year EPS
Because bonus shares are retroactively applied, the previous year's EPS must also be restated by adding the bonus shares to that year's WANES denominator.