Conversion of shares into another category

When a company converts its shares into another category (e.g. conversion of saving shares into ordinary shares), the exchange ratio must be communicated.

In this context, stock option contracts (stock futures) have both the strike price (daily closing price) and the quantity of shares to be delivered changed on the basis of the exchange ratio.

As in the case of merger operations, Borsa Italiana applies the exchange ratio indicated by the company according to the formula 6, rounded up to the sixth decimal digit.

Formula 6.

   1
K = --------------------
       Exchange ratio

Adjustment of the exercise price (daily closing price):

E_ex = E_cum  x K

where:

• E_cum = exercise price (daily closing price) before the adjustment
• E_ex = exercise price (daily closing price) after the adjustment

Adjustment of the number of underlying shares (lot):

                   1
A_ex = lot x -----
                    K

where:

• A_ex = number of underlying shares after the adjustment

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