What is meant by consolidation?
1) A consolidation is an Exchange of existing shares for a
fewer number of the same share type with an increase in the nominal value per
share maintaining the company’s overall share capital. This means that although
your shareholding is reduced, you do not lose any value as the market price of
the shares will increase accordingly.
2) A company would issue a consolidation (reverse stock split) to increase the
share price because they feel it would be more marketable at a higher price.
The nominal value of each share is adjusted to maintain an equal total share
capital as before the consolidation. The new shares are issued free of all
charges to shareholders. On the effective date of the consolidation the price
per share is adjusted to take into account the reduced number of shares in
issue.
Related Articles
What is meant by Dividend?
A dividend is a payment made by a corporation to its shareholders. If you’re a shareholder, you can think of a dividend as your share of the company’s profits. You will be eligible for dividends If you’ve purchased the stocks before the ex-date. If ...
What is meant by stock split?
A company increases the number of shares that are outstanding by issuing more shares to existing shareholders. For example, in a 2-for-1 stock split, every shareholder holding one share is given an additional share. In such a case, the face value of ...
What are the types of corporate actions?
The different types of corporate actions announced by a company are: Rights issue Dividend Stock Split Conversion of debentures into shares Amalgamation Merger Demerger Capital reduction / Consolidation of shares Buy Back Bonus Open Offer