Strategies to make profit out of a firm's bonus share issue
By taking up the bonus shares issued, the additional shares will reduce your average cost per share and this could give you an opportunity to sell at a margin. Last week after my last article on “Why Bonus Share Issue is not a Free Lunch After all”, I got an invitation from an investment group to train their members on how they can invest in the stock market to weather the prevailing bearish cycle. As I facilitated the training, I observed many of the members of the group had disagreed on their investment philosophy after the group participated in a recent bonus issue launched a fortnight ago by one of the listed telecommunication amidst some uproar terming it as a risky move.
Interestingly, in this case I was not called to “train” but to cool temperament and with a direction on how the members can gain out of a bonus issue in the wake of shocks of the bearish market which was already causing jitters to the members. This situation is analogous to what many investment groups and individual investors in the market are facing as they try to wither the shocks of the bearish conditions.
These seasons are usually tricky for many investors as they are characterised by liquidity crunch complicated by many ‘emotional investors’ rushing to sell off their stocks to exit the market before the prices devalue. This price devaluation often turn out as a scare to potential investors willing to get entry as they mark time for prices to hit rock bottom and sometimes out of fear that further devaluation may erode their capital should they jump into the bourse.... Read the full, comprehensive news article and discuss at Business Daily Africa