Money Basics · Stocks & demat

Splits, bonuses & buybacks

One morning your 10 shares became 20 and the price halved. You panic-Google. Relax. It's a corporate action, and understanding these prevents both panic and false excitement.

Stock split

One share becomes 2, 5 or 10; the price divides identically. A ₹2,000 share splits 1:10 → you hold 10× shares at ₹200. Your value: unchanged, to the rupee. Companies do it purely to make the stock feel affordable and liquid.

Bonus issue

'Free' shares. 1:1 bonus doubles your count, price adjusts down proportionally. Value change: zero. It's a shareholder-friendly signal (companies issue bonuses from reserves), but the 'free shares' framing fools people every cycle.

> A split or bonus is cutting a pizza into more slices. More pieces, same pizza. Any 'stock is cheaper now!' excitement is innumeracy.

Dividend dates. The one with a deadline

To receive a declared dividend you must own the stock BEFORE the ex-date. Buy on/after the ex-date → the seller keeps the dividend. (The price typically drops by ~the dividend on ex-date. You can't buy the dividend for free.)

Buyback

The company repurchases its own shares. The reverse of issuing them. Fewer shares outstanding = your slice of ownership quietly grows. Why a company does it is genuinely contested: spare cash with nothing better to do, offsetting shares issued to employees, supporting the price, or the tax treatment of returning cash this way rather than as a dividend. Read it as one input among several.

Rights issue

The company asks EXISTING shareholders for more money at a discounted price. Not automatically good. Read why they need the cash. You can subscribe, sell the entitlement, or let it lapse (and get slightly diluted).

0change in your wealth from a split or bonus, always

ex-datethe only date that decides who gets the dividend

Takeaway. Splits and bonuses change the slice count, never the pizza. For dividends, only the ex-date decides who gets paid. Buybacks quietly grow your ownership share.