Reliance Power Board will give free bonus shares to all it’s shareholders to compensate the losses everyone of us suffered when the company was listed a week ago and now trading at Rs 375.Bonus can be in the ratio of 2:1.
Anil Dhirubhai Ambani Group’s Reliance Power shares are poised for up move on this news tomorrow on 18th Feb, Monday. This might lift the market up as well, the same way it pulled down the market on the Reliance Power IPO listing day of 11th Feb. On the listing day, Reliance Power share was down by 32%.
But Reliance Power board will not allot the bonus shares to company promoters. The company had issued the shares at Rs 450 while giving a discount Rs 20 a share to retail investors and accrued Rs 7,500 crore from IPO.
As per the Reliance Power Board and The Hindu - The company said its board would consider the free bonus shares at a meeting next Sunday, February 24, to benefit over four million of its investors and the cost would be accepted by promoter group by way of diluting its shareholders.
The company said that promoters would accept the dilution in their shareholding in the broader interest of investors.
Besides a proposal for issuing free bonus shares to all categories of shareholders, excluding promoters, the board would also consider other measures that could reduce the cost of Reliance Power Ltd shares below the IPO price of Rs 430 per share for retail investors, and Rs 450 per share for institutional and other categories of investors.
If you still did not get to know your IPO allotment status, please visit here to find out the number of shares alloted to you.
Update: Reliance Power Bonus shares record date will be decided later, most probably in the meeting on 24th Feb 2008. The bonus shares will be given to ALL SHAREHOLDERS and NOT ONLY to those retail investors who have applied for RPOWER [Rel Power] IPO shares.
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...looks like the new TV serial in town. More melodrama. Now Anil Ambani wants to assuage investors in RPOWER by giving them bonus shares immediately after the IPO.
For a company which listed just a week ago, on February 11, the Reliance Power board surprised everyone on Sunday when it announced that it will meet on February 24 to consider a bonus issue.
The promoters, who hold an 89.5% stake, have excluded themselves from the proposed bonus entitlement.
They are offering you double your shares, and the price will fall to half (won't it?). Given that the promoters own 90% of the company (45% by ADAG, and 45% by Reliance Energy) they are now saying that the public, which owned about 10% will now own about 20% (actually around 19%).
That also means the price will be adjusted downwards by that much, that's the way the market works. More shares means lower prices.
So another drama will unfold as people tell you "first time anyone has given bonus within 15 days of listing" and all such bull. Bonuses should be from retained earnings, not like this. And bonuses hold no value in today's day and age when your net holding is going to be valued exactly the same.
But it may benefit the individual shareholder as the price may be adjusted downwards by only 10% (since the promoters don't benefit) and each shareholder gets 2x his shares. But you know what is likely to happen? The share price will halve. That's the way an economic bazaar works. If people are selling x shares at Rs. 380, they will sell 2x shares for as low as Rs. 190.
I have to see how this pans out. There is no "value" here - please remember that Reliance Power was a momentum IPO, and the concept of value did not arise. The stock discounts its earning five years later by more than 20 - today we don't give fast growing stocks 20 P/E on one years earnings, and they asked us to pay 20 on earnings after five. So let's not really talk value. If the price reaches Rs. 50 maybe there is value, but not here. This is a momentum stock, and don't disregard the power of momentum - the movement may still be upwards.
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