Experts need your help

dilshanusjp · 1 Experts need your help Sun Oct 23, 2011 6:23 pm

dilshanusjp

Senior Equity Analytic

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Dear experts could you please explain me the following terms because i don't know the meaning of following.
1.Share swap
2.Share split
3.Capitalization of reserves

I expect your help & appreciate for your ideas Smile

sriranga · 2 Re: Experts need your help Sun Oct 23, 2011 7:33 pm

sriranga

Co-Admin

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Please find the following explanations which I found from various sources.
(May be this will help you)
1.Share Swap
A stock swap, also known as a share swap, is a business takeover or acquisition in which the acquiring company uses its own stock to pay for the acquired company. Each shareholder of the newly acquired company receives a certain number of shares of the acquiring company's stock for each share of stock they previously held in the acquired company. Sometimes some shareholders are required to wait for an agreed-upon period of time before they are allowed to sell their new shares of stock.
(Source:http://www.answers.com/topic/stock-swap#ixzz1bbzRfUVd)
Recent Example in CSE
Experts need your help Cft10

2.Share Split
A stock split or stock divide increases the number of shares in a public company. The price is adjusted such that the before and after market capitalization of the company remains the same anddilution does not occur.
(Source:http://en.wikipedia.org/wiki/Stock_split)

In CSE website Sub division of shares explained as follows
Sub division of shares is where a company subdivides its outstanding shares so as to increase the number of shares. For example, in a 1-for-1 split, each shareholder receives an additional share for each share he or she holds. The company does not receive any funds, and hence, there is no change in the value of the firm. Since the firm has more shares now, the price per share will decline to reflect this.

3.Capitalization of reserves
Fully paid-up new common stock (ordinary shares) issued free to existing stockholders (shareholders) in proportion to their current stock/shareholdings. A bookkeeping transaction (because no cash changes hands), it capitalizesa part of reserves (retained earnings) to bring (1) share capital more in line with the assets employed; and (2) a high share price back to a more manageable amount, thus enhancing its marketability. Although the number of sharesheld by each shareholder increases, the value of the total shareholding remains the same as before the scrip issue. Also called bonus issue, bonus shares, or capitalization issue. (Source: http://www.businessdictionary.com)

Please note I'm not expert. Comments are correction appreciated.