whats d reason behind splitting n reverse splitting of shares?
3 Replies
CA Narendra Gupta
(CA )
(256 Points)
Replied 18 June 2010
When Companies share value is very high in market, company splits its share (for eg. 1 share of rs. 100 each in 10sh. of rs.10each) without changing its overall effect in price.
The reason behind this is that an Investor can purchase more share in same value( eg. 100 share of rs1000 each = rs.100000 , But in case above if share are split into 10 for 1 than 1000 share X rs100 each =rs.100000) This mean an investor can purchase more lots of share in same/less value.
This could basically benifit small investors.
Reverse split is Vice verse , But reason is to protect companies share to get De-list from Stock exchange as value could be very low.
manisha ahuja
(article clerk)
(147 Points)
Replied 19 June 2010
u hv given same eg. from economics times.......awesome xplanation
reverse split has something more 2 like some investors(co.s) are prohibitted from buying shares denominated below fv rs 10........
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