Hello, friends in this we will learn the detailed concept of BONUS SHARE & STOCK SPLIT with example.
First, we learn WHAT IS THE BONUS SHARE? then we will see WHAT IS THE STOCK SPLIT? and lastly see what is the difference between a bonus and stock split in Details 2021.
WHAT IS THE SHARE SPLIT?
Generally, company Share Split Like these 1:2, 1:5, etc.
Share split 1:2 Means your 1 share will convert into 2 shares. Here 1 share is your original share and after the split, your no. of the share will become 2 shares.
See another example Let’s say any company in the stock market decided to give a Share split 1:5. and I have 1 share in this company. my 1 share will become 5 shares.
Let’s understand through table Share Split 1:5
| No. Of shares | Share price | Investment Value | |
| Before Bonus | 100 | Rs.300 | Rs.30,000 |
| After bonus | 500 | Rs.60 | Rs.30,000 |
Effects of stock split
1.Make share price affordable.
2.Share split makes generally positive Sentiment.
3.Increase Liquidity and Demand.
Shareholders Equity Before Bonus
| Share Capital | Rs.10 (Face value) x1 Cr. Share=Rs.10 Cr. |
| Reserve | Rs.50 Cr. |
| Shareholder Equity Total | Rs.60 Cr. |
Shareholders Equity After Bonus
| Share Capital | Rs.2 (Face value) x5 Cr. Share=Rs.10 Cr. |
| Reserve | Rs.50 Cr. |
| Shareholder Equity Total | Rs.60 Cr. |
Reverse Stock Split
The reverse stock split is the opposite of the stock split.
Reverse Stock Split 50:1 means 1 Share for every 50 shares held.
Reverse stock split create Negative sentiment in the market about this company.
Reverse stock split creates to convert penny stock to Reasonable price.
WHAT IS THE BONUS SHARE?
Generally, the company gives bonuses instead of Dividends.
suppose XYZ. the company has good money in reserve surplus. and XYZ company no need this reserve surplus money in the future. so the company thinking to give this money to shareholders in the form of Bonus Shares, Dividends, etc.
The bonus gives like this 1:1 means 1 bonus share for every 1 share held.
The bonus gives like this 1:2 means 1 Bonus share for every 2 shares held.
Note-Always Remember in Bonus share 2nd digit is your original share and 1st digit is Bonus share.
Suppose XYZ Company Gives Bonus 2:1
| No of Shares | Share Price | Investment Value | |
| Before Bonus | 100 | Rs.300 | Rs.30,000 |
| After Bonus | 300 | Rs.300/3=Rs.100 | Rs.30,000 |
So we understand from the above example Before Bonus and After Bonus Share rice will Remain the Same. Only Changes in No pf Share and Share Price.
Effect Of Bonus Share
1.Bonus Gives instead of Dividends.
2.Bonus Share Create Positive Sentiment in the market.
3.Increase Liquidity and Demand.
Share Holders Equity before and after Bonus- Share Bonus 2:1
| Share Holders Equity -Before Bonus | |
| Share Capital | Rs.10 Cr. [Rs.10 (face value) x 1 Cr. Shares |
| Reserves | Rs.50 Cr. |
| Total Shareholders Equity | Rs.60 Cr. |
| hare Holders Equity -Before Bonus | |
| Share Capital | Rs.30 Cr. [Rs.10 (face value) x 3 Cr. Shares] |
| Reserves | Rs.30 Cr. |
| Total Shareholders Equity | Rs.60 Cr. |
When you will get Bonus and Split share Ex. Date & Record Date.
Announcement Date– Company Announces the Bonus/Dividend/Split this Date is Called Announcement Date.
Record Date- is the last date to decide who will get Bonus/Split/Dividend on share.
But in India, There is a T+2 Cycle. It means If you Buy Share on 1 July then on 3 July this share will come in your Name or in your portfolio.
Ex. Date–Bonus/split/Dividend only get this shareholder who buys share 1 day ago from Ex. Date.
Ex. Bonus means without Bonus
Cum Bonus means with bonus
| Announcement Date | Ex. Bonus Date | Record Date |
| 5 September | 15 October | 16 October |
| Trade Execution Date | |
| Buyer will get Bonus Share | 5 September-14 October |
| Seller will get Bonus Share | 15 October – 16 October |
SO I hope after reading this blog you understand All concepts related to Bonus share and stock split. If Further have any doubt then comment inbox I will make a solution for your queries.
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