Your Shares Just Got Diluted by a Rights Issue. Here's the Math on What You Actually Lost
7 min read
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7 min read
You log into your brokerage app and see a notice: a company you hold shares in is doing a rights issue. Your ownership percentage is about to drop. Nobody sent you a bill, nothing was sold out of your account, and yet you are apparently going to own less of the company than you did yesterday.
That is rights issue dilution, and whether it actually costs you money depends entirely on what you do next. The mechanism itself is not a loophole or a punishment. It is simple arithmetic, and once you see the numbers, it stops feeling mysterious.
In Indonesia, a rights issue is officially called HMETD, short for Hak Memesan Efek Terlebih Dahulu, or "preemptive right to subscribe to securities first." When a listed company needs more capital, whether to pay down debt, fund expansion or complete an acquisition, it can create new shares and offer them first to existing shareholders, in proportion to what they already own, before anyone else gets a chance to buy in.
That proportional offer is the whole point of the "preemptive" part. If you already own 0.1% of a company and it issues new shares, you get the right to buy enough new shares to keep owning 0.1%. What happens to your stake after that is your choice, not the company's.
The example below uses invented numbers, not a real IDX company, so you can follow the mechanics without worrying whether a particular ticker matches. The math is identical to the one used in real corporate action notices.
Say you own 1,000,000 shares in a company that has 1,000,000,000 shares outstanding in total. That makes your ownership stake exactly 0.10%.
The company announces a rights issue at a 5:1 ratio: for every 5 shares you already own, you get the right to buy 1 new share, at an exercise price of Rp500, well below the market price. That discount is normal. It is what makes existing shareholders want to actually pay for the new shares rather than let the offer expire.
At a 5:1 ratio, the company is issuing 200,000,000 new shares (1,000,000,000 divided by 5), which brings the total share count to 1,200,000,000 once the rights issue closes.
Once new shares exist at a lower price than the old ones, the stock's fair value has to land somewhere between the two. That blended value is called the Theoretical Ex-Rights Price, or TERP, and every brokerage and financial site in Indonesia uses the same formula to calculate it:
TERP = (A × P + B × R) ÷ (A + B)
Plugging in the 5:1 ratio from the example: 5 old shares at Rp1,000, plus 1 new share at Rp500, divided by 6 shares total.
TERP = (5 × 1,000 + 1 × 500) ÷ 6 = 5,500 ÷ 6 = Rp917 per share (rounded)
That is the new baseline price the stock is expected to trade at once the rights issue takes effect, purely as a matter of arithmetic, before the market reacts to anything else going on with the company that day.
This is the part most explanations skip. Getting HMETD does not force you into a single outcome. You have three real choices, and only one of them actually loses you money.
You use your right to buy 200,000 new shares (1,000,000 ÷ 5) at the Rp500 exercise price, spending an extra Rp100,000,000.
Your ownership percentage stays exactly where it was. You have not lost anything, but you have committed fresh capital to do it.
HMETD themselves are tradable on the IDX during the rights-trading window. If you do not want to put in more capital, you can sell the right itself instead of using it. The theoretical value of one right works out to the TERP minus the exercise price, spread across the ratio: (Rp917 − Rp500) ÷ 5 ≈ Rp83 per right.
You hold 1,000,000 rights (one per old share), so selling them all raises roughly Rp83,000,000.
Sell the rights at their theoretical value and, on paper, you come out roughly where you started. Your ownership percentage still falls, since you did not buy new shares, but the cash from selling the right offsets the drop in your existing shares' value.
This is the only path that actually costs you money. If you take no action and the rights simply expire unused:
That loss is not a fee, a tax or anything the company took from you. It is the value of the right you were entitled to and never used, whether by exercising it or selling it.
| Choice | Shares held | Ownership after | Value after | Result |
|---|---|---|---|---|
| Exercise rights | 1,200,000 | 0.10% (unchanged) | ≈ Rp1,100,400,000 | No loss, extra capital committed |
| Sell rights | 1,000,000 | 0.083% | ≈ Rp1,000,000,000 | Roughly no loss, no new capital |
| Do nothing | 1,000,000 | 0.083% | ≈ Rp917,000,000 | Loses the value of the unused right |
Missing the window is what turns "sell your rights" into "do nothing" by accident. Every rights issue on the IDX runs through the same sequence of dates:
Corporate actions like this move fast around their announcement, and checking the Market page in NetWort for the day's biggest movers can help you spot when a stock you hold is trading around a corporate action rather than reacting to ordinary news.
A rights issue is a decision, not something that happens to you passively. Exercising costs cash but keeps your stake intact. Selling the right costs nothing extra and roughly preserves your value. Only inaction actually gives value away.
Whichever choice you make, your cost basis and share count change, so log the outcome as a transaction in Holdings as soon as it settles. That keeps your average cost, ownership percentage and P&L accurate instead of drifting out of sync with what you actually hold.