Thread on Stock Split & Bonus
📝What Is a Stock Split—And What Does It Mean When One Happens?
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📝What Is a Stock Split—And What Does It Mean When One Happens?
Let's Unroll🧵🧵
What Is a Stock Split?
A stock split is when a company’s board of directors' issue more shares of stock to its current shareholders without diluting the value of their stakes. When a company declares a stock split, the number of shares of that company increases, but the
A stock split is when a company’s board of directors' issue more shares of stock to its current shareholders without diluting the value of their stakes. When a company declares a stock split, the number of shares of that company increases, but the
market cap remains the same. Existing shares split, but the underlying value remains the same. As the number of shares increases, price per share goes down.
Say you have one share of a company’s stock. If the company opts for a 2-for-1 stock split,
Say you have one share of a company’s stock. If the company opts for a 2-for-1 stock split,
the company would grant you an additional share, but each share would be valued at half the amount of the original. After the split, your two shares would be worth the same as the one share you started with.
Why Do Companies Split Stock?
Stock split is done to infuse liquidity and to make shares affordable for various investors who could not buy the shares of that company before due to high prices.
Stock split is done to infuse liquidity and to make shares affordable for various investors who could not buy the shares of that company before due to high prices.
How Does a Stock Split Affect You?
Because a stock split doesn’t change the underlying value of your investment, you may not notice any more substantial changes than the number of shares in your investment account.
Because a stock split doesn’t change the underlying value of your investment, you may not notice any more substantial changes than the number of shares in your investment account.
Some Examples of Stock Split
On 10th Jan 2022, Ipca Labs has done the stock split in the ratio of 1:2. It means for every 1 share held shareholders will receive 1 additional share and eventually price has been reduced from approx. 2200 on 09th Jan to 1100 on 10th Jan.
On 10th Jan 2022, Ipca Labs has done the stock split in the ratio of 1:2. It means for every 1 share held shareholders will receive 1 additional share and eventually price has been reduced from approx. 2200 on 09th Jan to 1100 on 10th Jan.
On 18th March 2021, Dixon Technologies has done the stock split in the ratio of 1:5. It means for every 1 share held shareholders will receive 4 additional share and eventually price has been reduced from approx. 20200 on 17th March to 4050 on 18th March 2021.
We can check it in the annual report of Dixon Technologies, number of shares has been increased from 2.60 cr to 13 cr but share capital amount is same i.e., â‚ą26 crores
What Is a Reverse Stock Split?
A reverse stock split reduces a company’s number of shares outstanding. If you owned 10 shares of a stock in a company, for example, and the board announced a 2-for-1 reverse stock split, you’d end up with five shares of stock.
A reverse stock split reduces a company’s number of shares outstanding. If you owned 10 shares of a stock in a company, for example, and the board announced a 2-for-1 reverse stock split, you’d end up with five shares of stock.
The total value of your shares would remain consistent. If the 10 shares were valued at â‚ą50 per share before the reverse split, the five shares would be valued at â‚ą100 per share after the reverse split. In either case, the total value of your investment remains â‚ą500.
Example of Reverse Stock Split
Reverse stock splits are very rare to find in Indian companies, there is a company called L G Balakrishnan & Bros Ltd which has done the reverse split in FY 2010 where the company has done a reverse stock split in 10:1. It means for every 10 shares
Reverse stock splits are very rare to find in Indian companies, there is a company called L G Balakrishnan & Bros Ltd which has done the reverse split in FY 2010 where the company has done a reverse stock split in 10:1. It means for every 10 shares
held shareholders will convert into 1 share, and eventually share price will be increased proportionately.
Bonus Issue:
What are Bonus Shares?
Bonus shares are the additional shares that a company gives to its existing shareholders on the basis of shares owned by them. Bonus shares are issued to the shareholders without any additional cost.
What are Bonus Shares?
Bonus shares are the additional shares that a company gives to its existing shareholders on the basis of shares owned by them. Bonus shares are issued to the shareholders without any additional cost.
For example:
If a company declares one for two bonus shares, it would mean that an existing shareholder would get two additional shares for one existing share.
Suppose a shareholder holds 2,000 shares of the company.
If a company declares one for two bonus shares, it would mean that an existing shareholder would get two additional shares for one existing share.
Suppose a shareholder holds 2,000 shares of the company.
When the company issues bonus shares, he will receive 1000 bonus shares, i.e. (2000 *1/2 = 1,000).
Who is Eligible for Bonus Shares?
Shareholders who own the company's shares before the ex-date and record date are eligible to receive bonus shares from the company.
Shareholders must purchase shares before the ex-date because if they purchase on the ex-date,
Shareholders who own the company's shares before the ex-date and record date are eligible to receive bonus shares from the company.
Shareholders must purchase shares before the ex-date because if they purchase on the ex-date,
the company will not give the ownership of shares, and therefore, they will not be eligible to receive bonus shares.
Once a new ISIN is allotted for the bonus shares. The bonus shares will be credited to the shareholder's account within 15 days of time.
Once a new ISIN is allotted for the bonus shares. The bonus shares will be credited to the shareholder's account within 15 days of time.
Some Examples of Bonus Issue:
IEX had approved an issue of bonus shares (2:1) wherein shareholders will get two bonus shares for every one share held by them. The record date for the same is December 6, 2021.
IEX had approved an issue of bonus shares (2:1) wherein shareholders will get two bonus shares for every one share held by them. The record date for the same is December 6, 2021.
Consequently, Indian Energy Exchange’s share price has adjusted to ₹249 from ₹747.
APL Apollo had announced the issuance of bonus shares in the ratio of 1:1 i.e., 1 free equity share for every share held by the shareholder. The record date for the same is September 16, 2021.
APL Apollo had announced the issuance of bonus shares in the ratio of 1:1 i.e., 1 free equity share for every share held by the shareholder. The record date for the same is September 16, 2021.
Consequently, share price has adjusted to â‚ą920 from â‚ą1840.
Astral had announced the issuance of bonus in ratio of 1:3 i.e., 1 bonus share for every 3 existing equity shares. The record date for the same is March 18, 2021. Consequently, share price has adjusted to â‚ą1715 from â‚ą2455.
As we can check from Annual Report of Astral Ltd the impact of the Bonus issue, the company has issued approx. 3cr shares resulting in an increase in the issued share capital of the company:
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