Right issue on NEPSE: does the price really drop?
"The price will crash after the right issue" is one of the most repeated lines on NEPSE. It is half true. On the ex-right day the price does fall - by design, through a simple formula. The real question is what happens after that adjustment: does a stock keep up with the market once the new shares arrive? We followed every right issue at Rs 100 in our price history, across all sectors, from December 2021 to March 2026, to find out.
The drop everyone sees: the price adjustment
A right share lets existing shareholders buy new shares, usually at Rs 100, in proportion to what they already hold. Because the new shares are sold far below the market price, the company's value is spread over more shares, and NEPSE adjusts the price on the ex-right (book closure) day:
Adjusted price = (market price + right price x right ratio) / (1 + right ratio)
Take a stock at Rs 500 with a 1:1 right at Rs 100. After the adjustment it trades at (500 + 100) / 2 = Rs 300. That 40% "fall" is not a loss: a shareholder who pays Rs 100 for the new share now holds two shares worth Rs 600 in total - the Rs 500 they had plus the Rs 100 they paid. Our right share calculator does this sum for any issue, and our guide to bonus shares, right shares and cash dividends explains the rules.
So to judge a right issue fairly you have to look past the adjustment. We used prices adjusted for every bonus and right share, so a 1:1 right does not show up as a fake 40% crash, and compared each stock with the NEPSE index from the ex-right date onward.
What happened after the adjustment
We found 47 right issues at Rs 100 between December 2021 and March 2026; 40 of them have the index alongside them for a fair comparison (our NEPSE index history starts in May 2022). Hydropower dominates - 32 of the 47 - followed by insurance companies, with a few banks and finance companies.
| After the ex-right date (against NEPSE) | Median move | Beat the index |
|---|---|---|
| 20 sessions | +2.2% | 67% of cases |
| 60 sessions | -2.7% | 35% of cases |
| 120 sessions | -7.3% | 34% of cases |
| About a year (250 sessions) | -9.9% | 29% of cases |
So the answer has two parts:
- Right after the adjustment, prices often bounce. Two in three right-issue stocks beat the index over the next month. The adjusted price looks "cheap" next to the old one, and that attracts buyers.
- Over the following months, most right-issue stocks fell behind. By about a year later only three in ten were ahead of the index, and the typical stock trailed it by about 10%.
The bigger issues were not better. Rights of 1:1 or larger lagged the index by a median 7.7% over 120 sessions, against 5.8% for smaller ones.
Why right-issue stocks tend to lag
- More shares chase the same profit. A 1:1 right doubles the share count. Unless the new money earns as much as the old capital did, earnings per share fall, and the price follows.
- The reason for raising money matters. A bank meeting a capital requirement, an insurer meeting a paid-up capital rule or a hydropower company funding a delayed or over-budget project are all raising money because they have to, not because a great opportunity is waiting.
- Some holders sell their new shares. Not everyone wants to keep the shares they were "forced" to buy, and that extra selling arrives in the months after the issue.
- Unpaid rights go to auction. Shares nobody took up are sold off, adding more supply.
How to handle a right issue
- Don't sell just because of the ex-right drop. The adjustment itself costs you nothing if you take up your rights.
- Don't ignore your rights. If you hold the shares and don't apply, your stake is diluted and the adjusted price falls anyway - you take the drop without the new shares. If you don't want them, selling before book closure is usually better than letting them lapse.
- Ask why the company is raising money. Read the right-issue notice and check the company's profit trend on its free stock page. A right issue to fund a project that is already producing is very different from one to cover losses.
- Don't buy just for the "cheap" adjusted price. The short bounce after the adjustment has not lasted on average.
The full study
This is only a glimpse. The full study - every right issue since 2021, by sector, by ratio and year, and what each stock did afterwards - is inside the MacroLens NP desk, alongside the live list of upcoming right issues on the issues page. Start your free 7-day trial or sign in to see it.
This is research on past prices, not investment advice. Each right issue is different; check the company's own notice before you decide.
Source: MacroLens NP analysis of NEPSE adjusted price data, December 2021 - October 2026. Chart: MacroLens NP. Cover photo: public domain.
