7/28/2019 [Economy] Shares vs Stocks, Rights Issue of Shares, Bonus Shares, RSU Mrunal

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7/28/2019 [Economy] Shares vs Stocks, Rights Issue of Shares, Bonus Shares, RSU Mrunal

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3/29/13 [Economy] Shares vs Stocks, Rights Issue of Shares, Bonus Shares, RSU Mrunal

mrunal.org/2012/04/economy-shares-vs-stocks-rights-issue.html

no er case: ou re ng s er. ou re no o ng goo , no o y s e p ng you. o you wan some ore gn nves or o comeand help you. But hell also look into debt:equity ratio before finalizing the terms of deal. What can you do to appear good infront of him?Obviously: reduce the Debt to Equity ratio. But how?Simple: offer new equity (shares) to existing shareholders @ a discounted rate. (=Rights issues of shares). Youve offer it at adiscounted rate, else no one would buy it. Youre doing this whole exercise, because youre in trouble in the first place.

For example: Here is my offer of Rights issue:

1:1, Face value Rs.100, @ Discount of Rs.50Meaning, if you already have 10 shares of my company, you can buy 10 more shares from me (1:1), Each of these shares will

have Worth Rs.100 printed on it but Ill give it to you for Rs.50 only.What good does it do to me? Well in the legal record, for the calculation of Debt Vs Equity =theyll calculate using Rs.100 facevalue. Thus my Debt:Equity ratio will go down, and Ill look good when credit rating agency / FDI investor starts evaluating me.

Bonus shares

In the debt versus equity article, you saw that a company can collect money from people by issuing shares (IPO/Equity/Stockwhatever you want to call it), but every year, company reports the profit to the board of directors. The board of directors willdecide how much profit is to be re-invested in the company and how much profit is to be shared with the shareholders.The profit, thus shared with the shareholders is called dividend. Generally dividend is sent to the shareholders via cheques.But sometimes,company also gives you extra shares.It means company paid the money to purchase shares on your behalf and gives it to you. So you got free shares and next yearwhen company distributes the dividends (cash), you will get more dividend, because now you are holding more shares.Alternatively, you can sell away these bonus shares to someone else and take out the money.These are called bonus sharesWhat is the difference between Bonus shares and rights issuesWell, as a shareholder, you get shares for free under bonus shares.But youll have to pay money for buying new shares under rights issue

Employee stock option scheme

Here the company issues shares its employee at a discount price.This is done to make the employees committed to the success of company because if the company makes more profit, theycan walk away with higher dividends.Such shares have minimum lock in period: for example if your boss gives it today, you cannot sell it for one or two years.

Restricted stock unit (RSU)

This is also a form of Employee Stock Option but here the company promises to deliver shares to its employee in future date.For example, Apples new CEO Tim Cook: hell get $900,000 of cash salary and a $377 million in RSU.Apple will deliver him 500,000 shares of Apple stock in 2016, and 500,000 more shares in 2021 as long as he staysemployed at the company.

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