QUODD Offers Adjustment Factors for Rights Offering Corporate Actions

We are excited to share that we have added adjustment factors for rights issues to our historical stock price API. This API currently supports adjusted historical prices calculations for corporate actions such as splits, cash dividends, stock distributions, bonus shares, scrips, and spinoffs. The addition of rights issue support is essential for our Wealthtech customers that need to evaluate historical stock performance, or perform backtesting or historical charting, and require fully adjusted time series pricing data.

A rights issue is an invitation to existing shareholders to purchase additional new shares in the company at a discounted rate. Sometimes referred to as a rights offering, a company may choose to offer this for various reasons, including raising capital, paying off debt, or company expansion.

As a result of a rights issue, the number of shares will increase, similar to the increase from stock dividends or splits, and you must adjust the stock’s closing price for the change. Adjustment factors are used to calculate the adjusted close price of the stock. 

Our GlobalHistorical API offers historical prices for equities trading on more than 80 global exchanges. It supports open, high, low volume, VWAP, TWAP, and other market statistics going back to 1/1/1994 for US exchanges and 1/1/2000 for most international exchanges. With the Get Adjustment Factors endpoint, you can request corporate action adjusted historical prices for splits, cash dividends, stock distributions, bonus shares, scrips, spinoffs, and now, rights issues. The Get Adjustment Factors API returns a list of corporate action adjustment factors used to calculate historical price adjustments for a given security in a date range.

Adjustment factor calculation requires multiple sources of data including security reference data, corporate action data, and pricing data. The GlobalHistorical API brings all 3 components together and constructs a timeline of events that includes all past corporate actions and adjustments. Users can easily retrieve the exact adjustment factor with the corresponding security details and dates without having to search and compile everything themselves. The adjustment factor also allows users to accurately track price history.

QUODD calculates the adjustment for rights issues using the following methodology formula:

A recent example of the importance of allowing users to accurately track price history is Korean Air which conducted a rights offering to help finance the carrier’s acquisition of Asiana Airlines earlier this year. With the rights issue, shareholders had the opportunity to buy additional Korean Air shares at a discounted price. Korean Air set the exact share price for their rights offering on February 26 and listed the new shares for trading on the Korea Exchange on March 24. The price adjustment calculator fell on the Ex-date of January 25. This was the date that a shareholder had to purchase to receive the payment. In this example, you can see that everything from before the ex-date has the price adjustment and that the stock price fell to an amount generally equal to the dollar amount of the distribution.

In the chart above, the adjusted close price chart is normalized and shows a smooth trend of the stock price over time versus without the adjustment you would notice a drop in price on the Ex-Date (which is not true representation of stock performance over time).

If you are interested in learning more about our corporate actions or historical stock quote APIs, please contact sales@quodd.com.