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Hi, could you please interpret this bonus fraction
Proof of bonus fraction
By taking the bonus fraction as 1.1, we are stating that the rights issue is the equivalent of a 1 for 10 bonus issue plus a full price issue for the remainder of the shares.
Considering an individual who held 40 shares before the rights issue, this would mean taking a bonus of 4 shares and paying the full price for 6 (taking his year end holding upto 50 shares as would be the case following the 1 for 4 rights issue). We will show that the share price under this alternative is the same as we calculated above and hence the two are equivalent.
Hi, could you please interpret this bonus fraction
Proof of bonus fraction
By taking the bonus fraction as 1.1, we are stating that the rights issue is the equivalent of a 1 for 10 bonus issue plus a full price issue for the remainder of the shares.
Considering an individual who held 40 shares before the rights issue, this would mean taking a bonus of 4 shares and paying the full price for 6 (taking his year end holding upto 50 shares as would be the case following the 1 for 4 rights issue). We will show that the share price under this alternative is the same as we calculated above and hence the two are equivalent.