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Stocks - Corporate Actions
Corporate Action Explanation Why Company offers? Impact on fundamentals of the Company
Rights Issue Process of a company for raising
funds from its existing shareholder.
It usually offered at a discount to
the market price.
When company need funds, but they
don’t want to take more debt.
market capitalization remain same.
Bonus Share Free shares given to shareholders
of the company.
Do not involve cash outflow from the
company.
To increase the liquidity, number of
shares in circulation increases.
Post Bonus issue, share price is adjusted for
the increased capital.
Net worth does not change post bonus issue.
EPS will go down.
Stock Split Split in the face value of the share. To increase the number of share in
circulation and to make stocks appear
cheaper to retail investors.
market capitalization remain same.
Share buyback Process by which companies
repurchase it share from its
shareholder.
It can be at premium or discount
depending at market situation. But
generally it happens at premium.
It is one of the way of returning cash to
shareholder.
When company has huge cash in its
books of account.
Sometimes when the stock price is falling
sharply, companies announce a buyback
to signal a floor price for the stocks.
Show the confidence of the promoters
about their company.
It increases EPS and DPS of the company.
No impact on share price post buyback.
Dividends A dividend is normally paid by the
companies out of excess profit that
was generated during the year
When company has excess cash and have
no plan for an expansion.
Investor should be cautions if company
continue to avoid paying a dividend and
keeps on building cash without any signs
of investing for the future.
EPS decreases as RE decreases

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Stocks - Corporate Action

  • 1. krishna.khandelwal2010@yahoo.com Stocks - Corporate Actions Corporate Action Explanation Why Company offers? Impact on fundamentals of the Company Rights Issue Process of a company for raising funds from its existing shareholder. It usually offered at a discount to the market price. When company need funds, but they don’t want to take more debt. market capitalization remain same. Bonus Share Free shares given to shareholders of the company. Do not involve cash outflow from the company. To increase the liquidity, number of shares in circulation increases. Post Bonus issue, share price is adjusted for the increased capital. Net worth does not change post bonus issue. EPS will go down. Stock Split Split in the face value of the share. To increase the number of share in circulation and to make stocks appear cheaper to retail investors. market capitalization remain same. Share buyback Process by which companies repurchase it share from its shareholder. It can be at premium or discount depending at market situation. But generally it happens at premium. It is one of the way of returning cash to shareholder. When company has huge cash in its books of account. Sometimes when the stock price is falling sharply, companies announce a buyback to signal a floor price for the stocks. Show the confidence of the promoters about their company. It increases EPS and DPS of the company. No impact on share price post buyback. Dividends A dividend is normally paid by the companies out of excess profit that was generated during the year When company has excess cash and have no plan for an expansion. Investor should be cautions if company continue to avoid paying a dividend and keeps on building cash without any signs of investing for the future. EPS decreases as RE decreases