Multibagger IPO: A long term investor enjoys various other benefits that a short term investor or trader can’t even think of. As per the listing rule, a listed entoty can reward its shareholders from its capital resevers that is an additional benefit for shareholders. so, a short term investor earns from stock movement whereas a long term shareholders earns from stock movement and various rewards announced by the listed company like bonus shares, interim/final/special dividends, stock split, buyback of shares etc. A company may announced most of these rewards in long term, which may look small at once but in long term, its impact leads to whopping return for a shareholder.
For those who can’t believe in such small rewards given by listed companies from its capital reserves, they need to look at Captain Pipes IPO. This SME IPO was proposed for listing on BSE SME exchange and it was launched at ₹40 apiece in November 2014. Captain Pipes IPO lot size was 3,000 company shares. The SME stock listed on BSE SME exchange at ₹41.90 levels, delivering tepid 4.75 per cent listing gain to the allottees. However, the SME stock declared stock split and bonus shares in 2023.
1:10 Stock split
The SME stock declared stock split in 2023 and it traded ex-split on 3rd March 2023 for subdivision of stocks in 1:10, which means one share of the company with face value of ₹10 was subdivided into 10 shares with a face value of Re 1 per equity share. So, after stock split in 1:10 ratio, an investors shareholding in the stock surged 10 times and after the stock subdivision, Re 1 rise in the stock led to ₹10 per share rise for a shareholder who was a beneficiary of this 1:10 stock split.
2:1 bonus shares
On 3rd March 2023, this SME stock traded ex-bonus as well for issuance of 2:1 bonus shares. This means two bonus shares were awarded to the eligible shareholders of the compnay for every one share they held. So, a beneficiary shareholders shareholding surged three times after the 2:1 bonus share issue. This means, Re 1 rise in this share after bonus share issue, a beneficiary shareholder gained ₹3 per share without any further investment.
Impact of bonus shares and stock split
As mentioned above, after 1:10 stock split and 2:1 bonus share issue, a shareholders shareholding surged 30 times (1 x 10 x 3).
₹1.20 lakh turns to ₹23.50 lakh in nine years
So, if a lucky allottee had remained invested in this SME stock till date despite tepid listing premium, its net shareholding in the stock would have turned to 90,000 (3,000 x 30) as Captain Pipes IPO lot size was 3,000 shares of the company. As an investor to apply in lot and one lot comprised 3,000 company shares. Net investment of an allottee would have been ₹1.20 lakh ( ₹40 x 3000).
Today, Captain Pipes share price is ₹26.12 apiece on BSE. so, absolute value of an allottee who had remained invested in this stock till date after allotment of shares through allotment process would have become ₹23.50 lakh ( ₹26.12 x 90,000).
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.
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Updated: 31 Jul 2023, 02:30 PM IST