Stock Price Adjustment: Process for Bonus and Rights Shares

Understanding how stock prices are adjusted for bonus and rights shares is crucial for all investors in the stock market. This article explains the process of price adjustment for bonus and rights shares with examples.

Bonus Shares Price Adjustment

When a company decides to distribute bonus shares, the stock price is adjusted on the book closure date. The adjustment is calculated based on the percentage of bonus shares issued. Here's an example using Sagarmatha Insurance:

Example:

- Sagarmatha Insurance declared an 86% bonus share with a book closure date of June 16. This means shareholders as of June 13 are eligible for the bonus shares (as there was no trading on June 14 and 15).

- Market price on June 13: NPR 1268

Rights Shares Price Adjustment

For rights shares, shareholders have the right to purchase additional shares at a specified price. The stock price is adjusted on the book closure date. Here's an example using Janutthan Samudayik Laghubitta:

Example:

- Janutthan Samudayik Laghubitta declared a 100% rights issue with a book closure date of June 17. This means shareholders as of June 16 are eligible to purchase the rights shares.

- Market price on June 16: NPR 1700

Important Information

- Book Closure Date: Shareholders on record as of this date are eligible for bonus or rights shares.

- Bonus Shares: When bonus shares are issued, the market price decreases as additional shares enter the market.

- Rights Shares: For rights shares, the purchase price of the rights shares is included in the calculation.

By understanding the process of price adjustment for bonus and rights shares, investors can make informed decisions in the stock market.