Book Close Date, Price Adjustment, and Dividend Explained

Book closure (record date): The book close date, also known as the record date, is the deadline set by a firm to determine whether shareholders are entitled to receive dividends or engage in other corporate acts such as bonus shares. Only shareholders listed on the company’s books as of this date will be eligible for the benefits.

Price Adjustments: When a corporation declares a dividend or a bonus offering, the stock price usually adjusts to reflect the payout or increase in the number of shares. Dividends frequently cause the stock price to fall by the dividend amount on the ex-dividend date. Bonus shares’ prices adjust proportionally depending on the bonus ratio.

Dividend: A dividend is a payment paid by a corporation to its shareholders, typically in the form of cash or extra shares. It reflects a portion of the company’s earnings and is distributed at the discretion of the board of directors.

Best Time to Buy Shares for Bonuses: To be eligible for bonus shares, you must be a shareholder on the record date. Here are the important dates to consider:

• Declaration Date: It is the day on which the corporation declares its intention to pay a dividend or issue bonus shares.
• Ex-Date: The date on which the stock begins trading less the value of dividend or bonus shares. To be eligible, you must have purchased the shares before this date.
• Record Date (Book Close Date): The record date is the day on which the corporation checks its records to determine which shareholders are entitled to dividends or bonus shares.

Best time to buy: You should purchase the shares at least one working day before the expiration date to guarantee that your purchase is completed before the record date, allowing you to qualify for the bonus shares.

Example Bonus Shares Timeline:

• Declaration Date: July 1
• Ex-Date: July 10
• Record Date: July 11

To be eligible for the bonus shares, you must purchase the shares by July 9 or earlier.

Additional Considerations

• Stock Settlement Period: Typically, the settlement period for stock trades is T+2 (trade date plus two business days); therefore, you must account for this time to ensure you are recognised as a shareholder by the record date.
• Market Behaviour: Be mindful that stock prices may rise prior to the expiration date as investors anticipate the bonus issue. This may influence your purchasing decision, depending on the amount you are willing to spend.

Conclusion

To be eligible for bonus shares, ensure that you buy the shares before the expiration date, taking into account the settlement term. Keep an eye on the company’s announcements and make your purchase accordingly.