bonus share and stocks split

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bhavana

Guest
#1
What is difference between bonus share and stocks split?
Does face value in both case changes?
 
#2
bhavana said:
What is difference between bonus share and stocks split?
Does face value in both case changes?
Locally we call them bonus, internationally it is called a stock split. They both mean the same.

A stock split (bonus) simply involves a company altering the number of its shares outstanding and proportionally adjusting the share price to compensate. This in NO WAY affects the intrinsic value or past performance of your investment, if you happen to own shares that are splitting.

A typical example is a 2-for-1 stock split. A company will announce that it's splitting its stock 2-for-1 in one month. One month from that date, the company's shares (having traded the day before at, say, Rs.30) will now be trading at half the price from the previous day (so they'll open at Rs.15). The company, which had 10 million shares outstanding, now consequently has 20 million shares outstanding. The price has been halved in order to accomodate a doubling of the share total.

Why would a company do a stock split (bonus)?

A few reasons. First, as a stock price skyrockets, some people will be psychologically unwilling to pay that "high price" so a stock split brings the shares down to a more "attractive" level. Again, the intrinsic value has NOT changed, but the psychological effects may help the stock.

Second, a stock split generally occurs in the face of new highs for the stock. Thus, it's an event dripping with positive connotations and associations. . . it's makes bulls snort and roar to suddenly have "twice as many shares" as they started with, for example.

Third, and final, with lower-priced shares, a stock's LIQUIDITY increases, often reducing the BID/ASK SPREAD and making it easier to trade. This is always good.
 
#3
in case of a bonus the face value is intact where as the price of the share gets decreased according to the ratio in which it has been announced. for example a 1:1 bonus means the price gets half of the market rate, i.e on the date of x-bonus.

sometimes a company may also announce a stock split . in such case the face value gets decreased. generally we have stocks in the face value of 10 rs. but certain stocks may also have value of 100 rs . for example in the case of mico it had a face value of 100rs . the volume of trade in such stock is very low. thus to increase the volume the company had decided to decrease the face value in the ratio of 100 : 10 i.e the new face value would be 10 rs.
this gives the trader more advantage of trading in such stock. for example he had 100 shares of 100 face value would become 1000 shares of face value 10.
thus he could trade more frequently.
 

sh50

Active Member
#4
Very good explanations. Now purely from practical perspective, just as one gets ex-dividend record dates, from where does one come to know ex-bonus dates. Is there any source(nsewebsite) whrere one can get all the ex-dates of shares likely to declare bonus in one shot or does one have to know individually and ask brokers.
 
#6
With regard to getting Dates about BONUS/Stock Split/Dividend, NSE website (www.nse.co.in) is having an option "Corporate Actions". Here you can select data for a range of dates. e.g. from 1st Apr 2004 to 31-mar-2005, etc.
 

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