Just wanna survey whether is it every a company announced bonus distribution , all investor will jump in? or will stay put

e.g

CIMB (1 to 1 bonus) - anyone jumped in right after bonus news?

SUPERMX (1 to 4 bonus) - just announce 7pm . Will you guys jump in immediately?

Usually share price will move up the next day when there is such announcement. But not "all investor will jump in" lah..that would be exaggerated =P

Whylar? What's the reason for the bullish sentiment? The new shares won't increase the holdings mar coz price will be adjusted. So what's the benefit? How will it affect the stock's fair value?

but many ppl would expect the price surges until ex-date, then adjusted, then will rise back to near the level before adjusted, in this case u really gain a lot

This post has been edited by yktan83: Mar 3 2010, 11:35 PM

well if it is a good company, you'd be supporting it right? So more shares together with your support to push/hold it's price is win win for everybody. If bad company means more capital thrown in by , means bad risk for you.

Actually this is pretty easy money making tactic though ... although the profit might not be huge , but getting about 3 - 5% in 1 day is very good d...

Well.. My opinion is that it depends on whether the market has factored in the bonus. E.g. if everyone had already expected the bonus issue, then I assume they would have bought it early. E.g. I think the supermx bonus+div was discussed and also contributed to its price appreciation the past month. So if it gets announced, so the price might not move much. (Note .. i m still learning, i might be wrong)

nobody will knows unless u have some "insider" to get tips...

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Added on March 4, 2010, 12:46 amnobody will knows unless u have some "insider" to get tips...

This post has been edited by sohkeong: Mar 4 2010, 12:46 AM

Fundamentally, it will not affect the stock's fair value. But it will affect on the market sentiment positively because most people who buy shares don't look at the fundamental but are rather gamblers.

what is the different with share split over here? every 1 unit get 1 unit, same as every 1 unit become 2 unit???

split unit basically doest not affected the value of the stock. it just to increase the number of share in the market so that chances of stock manipulation can become higher

I believe the company have to pay for the bonus issue 1 (mostly from their retained profits) while a split is just ... a split.

Found some info below..thanks to GOOGLE

Issue of Bonus shares

A company issue shares in lieu for cash or sometimes against transfer of physical or intellectual property to the company's hands.

But bonus shares are issued to the existing shareholders by converting free reserves or share premium account to equity capital without taking any consideration from investors.

Bonus shares do not directly affect a company's performance.

Bonus issue has following major effects.

1. Share capital gets increased according to the bonus issue ratio.
2. Liquidity in the stock increases.
3. Effective Earnings per share, Book Value and other per share values stand reduced.
4. Markets take the action usually as a favorable act.
5. Market price gets adjusted on issue of bonus shares.
6. Accumulated profits get reduced.

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Whether Bonus shares are miraculous?
Few things match the sheer joy of getting a fat bonus at work. That is what shareholders of a good company feel when their company decides to throw a few shares (free of cost) in their direction. Here’s explaining what bonus shares are all about and why investors like investing in such companies. Free shares are given to you and are called bonus shares. Make money with shares. They are additional shares issues given without any cost to existing shareholders. These shares are issued in a certain proportion to the existing holding. So, a 2 for 1 bonus would mean you get two additional shares -- free of cost -- for the one share you hold in the company.

If you hold 100 shares of a company and a 2:1 bonus offer is declared, you get 200 shares free. That means your total holding of shares in that company will now be 300 instead of 100 at no cost to you.

Bonus shares are issued by cashing in on the free reserves of the company. The assets of a company also consist of cash reserves. A company builds up its reserves by retaining part of its profit over the years (the part that is not paid out as dividend). After a while, these free reserves increase, and the company wanting to issue bonus shares converts part of the reserves into capital.

What is the biggest benefit in issuing bonus shares is that its adds to the total number of shares in the market. Say a company had 10 million shares. Now, with a bonus issue of 2:1, there will be 20 million shares issues. So now, there will be 30 million shares. This is referred to as a dilution in equity.

Now the earnings of the company will have to be divided by that many more shares. Since the profits remain the same but the number of shares has increased, the EPS (Earnings per Share = Net Profit/ Number of Shares) will decline. Theoretically, the stock price should also decrease proportionately to the number of new shares. But, in reality, it may not happen.

A bonus issue is a signal that the company is in a position to service its larger equity. What it means is that the management would not have given these shares if it was not confident of being able to increase its profits and distribute dividends on all these shares in the future.

This post has been edited by GregPG01: Mar 4 2010, 11:21 PM

Folks, I believe there's a lot ppl who still do not understand what is a Bonus issue (and are still naive on the issue).

BONUS SHARES ARE NOT EXACTLY FREE as most ppl would like to believe it to. (because u don't pay anything for it doesn't mean it's free).

Assuming a simple company with the following balance sheet:

Assets RM1500

Liabilities RM500
---------------------------------
RM1000

ShareCapital RM400 @ 400 shares
Retained Earnings RM600

-----------------------------------
Shareholder's equity RM1000

Nett worth per share RM2.50 (RM1000 / 400 shares)
Each share represents RM2.50 worth in the company.

So our company decided to implement a bonus issue exercise on a one-to-one basis.

The mechanics of bonus issues are to "PAY" for the bonus shares by capitalizing on the Reserves in the company such as retained earnings/share premium/revaluation reserves. So it's just a book entry (accounting entry) by debiting the reserves account and crediting the Share capital.

Then in our example, post bonus issue exercise:

Assets RM1500

Liabilities RM500
---------------------------------
RM1000 (unchanged)

ShareCapital RM800 @ 800 shares (increase by RM400)
Retained Earnings RM200 (reduced by RM400) (capitalized)

-----------------------------------
Shareholder's equity RM1000 (unchanged)

Nett worth per share RM1.25 (RM1000 / 800 shares)

assuming you own 1 share before, now u will get 2 shares.
The 2 shares you own still represent the RM2.50 in the company.

Essentially a shareholder will not get any better deal than before the bonus issue.
There's no change to the earnings capacity/business conditions of the company.
However, the earnings per share will get diluted. so does the NTA (nett tangible assets) / share.

The only reason why ppl get "excited" over bonus issues are:
1) They "think" are getting free shares for nothing
2) Gullible ppl started buying the shares and pushing up the stock price

Remember that the bonus shares created (paid for) by taking from the existing reserves (represented by the nett worth of the existing shares).

wats the different bonus issue n split?

lets say spilt 1 to 2
bonus issue 1 to 1

both case if i have 100 share after ex, i'll have 200!

Price post-dis and ex-dis is will be adjusted accordingly. There is nothing to shout about. Buy the share if you think it is fundamentally strong. Don't let the distribution distract you.

Xuzen

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Added on May 1, 2010, 1:07 pmSplit will affect the par value. Say a par value pre-split is RM 1.00, a 1 to 2 split will make the par value to RM0.50

Bonus does not affect the par value.

Xuzen

This post has been edited by xuzen: May 1 2010, 01:07 PM

imho par value does not actually has effect towards the market..
par value of 1.00 and par value of 0.50 doesnt makes any different rite?

Par value only serves to confuse people. Can't wait for Bursa to get rid of this Par system. But then all the small cap companies will face even less liquidity than before due to the small number of shares in circulation if their par value was all fixed at RM1.00