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Bonus shares are the additional shares offered by a firm to its existing shareholders as a “bonus”. This is done when the company is not in a position to pay dividends to its shareholders despite earning decent profits for that particular quarter. Allotments are typically made in a fixed ratio e.g. 1:1, 2:1, 3:1, etc. A 2:1 bonus ratio means the existing shareholders (as on the record date) will get 2 additional shares for every 1 share held at zeroRead More
A stock split is one of the ways of increasing retail participation and is a quite common phenomenon in the stock market. A stock split is a firm’s process of dividing the existing shares into multiple shares to increase the number of outstanding shares held by a company. An illustration will make things clear: Split Ratio Old FV No of the shares held before split Share Price before split Investment Value before split New FV No. of shares held afterRead More
Issuing rights shares is yet another way companies turn to, for raising the required capital. Through a rights issue, companies grant shareholders the rights, but not the obligation, to buy new shares. Shareholders get the new shares at a discounted market price in proportion to their existing shareholding. Why Do Companies Go For Right Issues? Companies need capital for expansion and hence turn to the issue of shares. Instead of issuing shares to the public at large and diluting theRead More
Share buyback/ repurchase is when a company buys back its own shares from the existing shareholders. Share Buyback is an alternative, tex efficient way to return money to shareholders. There are two ways to buyback shares: Companies can buyback shares from the open market over an extended time period, or they may present a tender offer to shareholders. Here, shareholders have an option to submit (or tender) a portion or all of their shares within a certain time frame atRead More
An Offer For Sale (OFS) is an easier way to sell shares through the exchange platform for listed businesses. It is a simpler method where the promoters of public companies can sell their shares and reduce their holdings. Anyone including retail investors, FIIs (Foreign Institutional Investors), companies, and Qualified Institutional Buyers (QIBs) can bid on these shares. The OFS facility is available on the BSE and NSE. Only the top 200 companies by market capitalization in any of the fourRead More
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