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What are the 2 options of a corporation when the stock of that corporation are sold...

What are the 2 options of a corporation when the stock of that corporation are sold for less than fair market value?

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ANSWER TO QUESTION

Option-1:- Buyback of Shares:

Option-2:- Bonus Issue

Lets us discuss the topic in details Option-1:- Buyback of Shares.

Buy Back of Securities is a very important tool for Companies who wants to reduce their Share Capital. Buyback is reverse of issue of shares by a company where it offers to take back its shares owned by the investors at a buy back price. Buy back offer may be binding or optional to the investors i.e. buy back may or may not be at the option of investor.

Buy back give confidence to the investor that company's promoter or substantial investor group want to increase its stake in the company and market will respond positively and share price go up.

Bonus is capitalisation of reserve and there is no flow of fund in case of bonus issue.Bonus issue is just like increasing no of share in the market by which quantity of share will increase and small retail invester will afford to buy such share and market price of share will rise.

ekkarill92 answered 1 year ago
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