Multibagger stock | 1:5 bonus shares, 1:5 stock split effect: Long-term stock market investors enjoy the benefit of a stock price rally and various other benefits that the company board announces with the passage of time. These benefits include dividends, stock splits, share buybacks, bonus shares, etc. Prima facie, these benefits may not appear lucrative at first glance. However, these benefits enable a stock market investor to generate wealth in the long term. This wealth creation trick applies to IPO investors as well.
To understand how these benefits lead to an increase in one's absolute investment value, one needs to look at the journey of ShreeOswal Seeds & Chemicals shares. ShreeOswal Seeds & Chemicals IPO was launched in June 2018 at a price band of ₹25 to ₹26. The SME stock was proposed for listing on the NSE SME Emerge platform. It was listed on the NSE SME platform at ₹27.85 per share on 20th June 2018 and closed at ₹27 per share on the listing date. However, if a share allottee had remained invested in this SME stock despite the flat listing, they would have generated a whopping return. This is because of the two major corporate announcements made by the company board post-listing. These two announcements are a stock split and bonus shares.
According to information available on the NSE website, the SME stock traded ex-split on 18 August 2023 to finalise the list of eligible shareholders for the 1:5 stock split. The company board had declared about the sub-division of the company shares from the face value of ₹10 per share to ₹2 per share.
This means that the shareholding of an eligible shareholder increased to 5 times after availing of the 1:5 stock split.
According to information available on the NSE website, the SME stock traded ex-bonus on 2 February 2024 for finalising the list of eligible shareholders for the 1:5 bonus shares. This means the shareholding of an eligible shareholder changed to five times after availing the 1:5 bonus shares.