The Trent share price has plunged over 33 per cent on Thursday after the Tata Group retailer’s stock turned ex-bonus. Trent shares were trading at Rs 2,771 in morning trade, down from Wednesday’s closing price of Rs 4,257.6.
The sharp decline in the share prices reflect the stock price adjustment following the bonus issue.
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The Tata owned company has set Trent June 4 as the ex-date for bonus share issue in the ratio of 1:2. Under the issue, shareholders will receive one bonus equity share for every two shares held as of the record date.
While announcing the Q4 results in April, Trent had announced a 1:2 bonus issue. The company said that it will issue one bonus share for every two shares owned as of the record date, and around 17.77 crore shares with a face value of Re 1 each were set to be issued as part of the offer.
The company has planned to allot the bonus shares by June 21.
What Is Bonus Issue Adjustment?
A bonus issue adjustment is the process by which a stock’s price, quantity, and historical charts are mathematically modified following a corporate bonus issue. Under the process, company issues free additional shares to existing investors without changing its overall market value.
For example, Trent announced a bonus issue with a ratio of 1:2. This means each shareholder receives one additional share for every two shares they own, and this action increases the total number of shares issued, thereby diluting the share price.
With the adjustment, the stock price may decrease in proportion to the bonus ratio but the investors should not confuse this reduction with a negative market correction or a decline in the stock’s inherent value.
Trent, the parent company of fashion chains like Westside, and Zudio is set to record 10 times growth as Tata group chairman Noel N Tata shared the growth strategy saying the target is “not-so-distant future”.
Also Read: Zudio, Westside Parent Trent Soon to Grow 10X, Noel Tata Unveils Roadmap
In Trent’s latest annual report, Noel Tata sharing the roadmap ahead said its future growth will continue to be anchored in building distinct, well-defined propositions across categories, while also aiming to take homegrown brands to international markets.