#NYKAA Bonus issue! Worth it?
Nykaa has declared a 5:1 Bonus issue of equity shares on the Ex-date of Nov 10th.
🌟Understanding the bonus:
5:1 bonus means for every share held, he/she would receive an additional 5 shares. On the other hand, the market price becomes 1/5th the original price.
Ex: For 1 share held at a market price of 1000, post issue he/she would be holding 6 shares with a market price of 200 each.
🌟The good and bad of this issue:
➡️ Exit strategy: Pre-IPO investors, promoters, and other major stakeholders who have made significant gains from Nykaa would be at this like an exit strategy.
➡️ Bonus Stripping: Private equity investors would benefit from bonus stripping as the cost of acquisition is higher than the ex-bonus share price. Bonus stripping is when an investor buys shares in a company knowing that the company is set to make bonus issues to its existing shareholders and sells the original share after acquiring the bonus issue.
➡️ Capital Gain: With the bonus issue coming into effect, the share price is effectively reduced by 5 times which makes it more liquid (more shares mean more volume trading). As the result, the market has shown positive signs as the share price by over 10% on 11th Nov.
