ITC shares Bonus of 1:1

[wallstreet1]

Itc Limited has informed the Exchange that the Board of Directors of the Company, at its meeting held on June 18, 2010, have recommended the following for the approval of the Members at the Annual General Meeting of the Company convened for July 23, 2010:

(1) Issue of Bonus Shares in the proportion of 1 Bonus Share of Re. 1/- each for every existing 1 fullly paid-up Ordinary Share of Re. 1/- each.

(2) Increase in the Authorised Share Capital of the Company from Rs. 500,00,00,000/- (Rupees Five Hundred Crores) divided into 500,00,00,000 (Five Hundred Crores) Ordinary Shares of Re. 1/- each to Rs. 1,000,00,00,000/- (Rupees One Thousand Crores) divided into 1000,00,00,000 (One Thousand Crores) Ordinary Shares of Re. 1/- each.

A lot of interest has been generated in ITC since the issue of bonus shares. If we would alll get cash 1:1, then I am sure we would all invest everything we had in such an offer, however, this offer sounds oo good to be true.
I am only talking about (1) & as a newbie in trading, it is very confusing to me.

1. The last traded market value of the ITC share was Rs 300. By 1 bonus share of Rs 1, does it simply mean that I will be getting 1 share for everry share held?

2. How much will the price of per share go down? I was told that it might go down to almost half. Any approximate percentage?

3. Will the bonuse be given 100%? & if it is given Which date exactly will the bonus be given?
If I read these words "have recommended the following for the approval of the Members at the Annual General Meeting of the Company convened for July 23, 2010" its obvious that we cannot say for sure that it will be given & even if it is given, it is clear that its a date after july 23rd, then what date will it be?

4. From a trader point of view & not an investor point of view, is it worth putting your money in & blocking it for a month? Considering that the AGM is on july 23, & the share prices will fall to almost half, is it worth it?

 

[wallstreet1]

Still waiting for a reply

 

[magnet]

Logic is say u have 1 share of 100 rupees....
And company announces 1 to 1 bonus...than now say tomm is record date...than tomorrow ull see 2 shares in your account...but share value will will be get half

If 2 bonus on 1 shares...than share price would be 1-3rd..

Its basically given as there might be excess stock ...

Better would be to take position when rates go down i.e it gets half not now

 

[d_s_ramesh]

Bonus does not give any impact on the price, may be there is some appreciation dues to increased value the company gets. It is given from the free reserves of the company's accumulated profits. Better than a dividend because these shares will entitle you for future dividends.

What ever is the ruling price at the time of bonus, the market will adjust it to the bonus shares. So nothing you get free because bonus is announced. Every single paisa of any company's value is factored into its current price on the markets

 

[traderankit]

Logic is right as told by "magnet". A scrip goes half the price on issue of bonus shares in the ratio as approved by the board. However, I don't agree to purchasing it only once the price goes half.

A lot of times share does a good run-up to the ex-date of bonus itself. A very recent example being that of Sterlite which ran up nicely before its ex-date. Or, for that matter even Wipro shares did a good run-up.

So basically, its a wise thing to purchase a scrip a few days before bonus date & continue holding it till its ex-date.

Personally, my choice would be to exit the scrip a day before ex-date so as not to block my funds if I don't intend to stick with that company for long.

Bonus shares take some to reflect in your demat account so basically half of your funds invested gets blocked.

I hope i'm able to explain my point & you don't have any further doubts.

Ankit