Corporate Actions

 

What is a Corporate Action?



A corporate action is any activity that brings material change to an organization and impacts its stakeholders, including shareholders, both common and preferred, as well as bondholders. These events are generally approved by the company's board of directors; shareholders may be permitted to vote on some events as well. Some corporate actions require shareholders to submit a response.


 Types of Corporate Actions

 Bonus Issue - Overview

 Issued in a certain proportion only to the existing shareholders.

 Eg : 2:1 bonus shares  If you already own 1 share, you get 2 additional new shares.

 Total holding of shares is now 3 shares instead of 1 share.

 No need to pay any money for these shares.

 Who pays for the Bonus shares? • Cash lying in free reserves and surplus of the Company

 Moved to Capital. • Addition of fresh Capital.

 fresh equity shares are issued to eligible equity shareholders in a specific ratio.

  New shares are issued at the existing Face Value of equity shares of the Company.  Face value remains the same post bonus issue.

Bonus Issue: Impact on Price of Share



 Dividend - Overview

Dividend = Distribution of certain portion of Company’s profits to its shareholders. 

 Dividend pay out ratio = Dividends Paid Net Earnings 

 Net-Profits which aren’t distributed as Dividend = Put in the Free reserves and surplus of the Company. 

 Interim dividend : Given during the year is authorized by the Board of the Company. 

 Final dividend : Recommended by Board of the Company. Approved by its shareholders in the Annual General Meeting (AGM). 

Dividend – Important Dates 




     DIVIDEND IMPACT ON PRICE
    Stock Split VS Bonus Issue


  Stock Split: Impact on Price of Share



Comments

Popular Posts