Recently the Gujarat government issued a new policy regarding the minimum amount of dividend distribution and bonus shares for its state public sector undertakings. In the wake of this development, most of the public listed companies from Gujarat saw their stock price jumping by more than 10 per cent and some even more than that. Out of the many triggers that retail investors look for before investing in a share it is the bonus announcement by companies. Many a times it is considered as a positive trigger for the companies. Year-till-date 35 companies have already announced their results and in the last calendar year 155 companies have announced a bonus issue.
Understanding Bonus Issues
Bonus issues, also known as bonus shares, are free additional shares offered to a company’s current owners. This issuance raises the total number of shares outstanding while maintaining existing shareholders’ proportional ownership. The announcement of bonus shares can have a beneficial impact on a company’s stock price and market sentiment in the short term. The notion of obtaining ‘free’ shares might attract new investors and potentially drive up the demand for the stock, resulting in a brief boost in the share price. Positive emotion can also assist a company in maintaining or improving its market reputation.
This story is from the May 22, 2023 edition of Dalal Street Investment Journal.
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This story is from the May 22, 2023 edition of Dalal Street Investment Journal.
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