Understanding Long-Term Stock Market Benefits: Bonus Shares and Stock Splits

Understanding Long-Term Stock Market Benefits: Bonus Shares and Stock Splits

VoM News Desk | November 13, 2023 | 08:53 PM IST | Breaking News | Follow on Google News

Understanding Long-Term Stock Market Benefits: Bonus Shares and Stock Splits

Understanding Long-Term Stock Market Benefits: Bonus Shares and Stock Splits

For long-term investors in the stock market, there are distinct advantages over short-term trading, such as the issuance of bonus shares, benefits from stock splits, dividends, and share buybacks. These benefits, derived from a company’s capital reserves and net profit, may not seem immediately impactful but can lead to substantial returns over time.

Case Study: One Point One Solutions Limited’s Growth Journey

The journey of NSE SME issue One Point One Solutions Limited offers insight into how these benefits can enhance long-term profit. The company’s initial public offering (IPO) in December 2017 was priced between ₹65 to ₹67 per share. The stock, listed on the NSE SME Emerge platform, debuted at ₹80.40, offering a 20% premium to initial investors.

Bonus Shares and Stock Split Impact

One Point One Solutions declared a 1:2 bonus share issuance in late 2020, meaning investors received one bonus share for every two shares held. This increased an investor’s shareholding significantly. In January 2021, the company also underwent a stock split in a 1:5 ratio, quintupling shareholders’ stock count. Therefore, an initial allotment of 2,000 shares would have increased first to 3,000 (due to bonus shares) and then to 15,000 (due to the stock split).

Remarkable Investment Growth Over Six Years

As of today, with One Point One Solutions’ share price reaching a 52-week high of ₹39, a long-term investor’s portfolio would have seen a significant increase. An initial investment of ₹1.34 lakh could have grown to ₹5.85 lakh (₹39 x 15,000 shares), showcasing the power of patient, long-term investing in the stock market.

VoM News Desk

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