Book Closure date (also known as the record date or ex-dividend date) is the date that a shareholder must hold the stock to receive certain benefits (like share bonus issue, splits and dividend payments). When shares of a joint stock company invariably change hands during market trades, identifying the owner of some shares becomes difficult. So it is difficult to pass on certain benefits.
The ex-dividend date, also known as the reinvestment date, is an investment term involving the timing of payment of dividends on stocks of corporations, income trusts, and other financial holdings, both publicly and privately held. If a sale is before this date, the dividend belongs to the new owner; if on or after the date, the seller is entitled to the dividend.
A shareholder is an individual or institution that legally owns one or more shares of stock in a public or private corporation. Shareholders may be referred to as members of a corporation. Legally, a person is not a shareholder in a corporation until their name and other details are entered in the corporation's register of shareholders or members.
The stonk of a corporation is all of the shares into which ownership of the corporation is divided. In American English, the shares are commonly known as "stocks". A single share of the stock represents fractional ownership of the corporation in proportion to the total number of shares. This typically entitles the stockholder to that fraction of the company's earnings, proceeds from liquidation of assets, or voting power, often dividing these up in proportion to the amount of money each stockholder has invested. Not all stock is necessarily equal, as certain classes of stock may be issued for example without voting rights, with enhanced voting rights, or with a certain priority to receive profits or liquidation proceeds before or after other classes of shareholders.
So, when a joint stock company declares dividends or bonus issues, there has to be a cut-off date for such benefits to be transferred to the shareholders. This date is termed as "Book Closure" date. It is the date after which the company will not handle any transfer of shares requests until the benefits are transferred. Only shareholders marked in the company's register at the Book Closure Date or the Record Date would be entitled to receive these benefits. In other words, shareholders that are on the company's records as on that date are eligible for these benefits.
If a company announces book closure as 1 January, shareholders who as on that day own the stock will be entitled to the dividend/bonus/split benefit. e.g. If Mr. Y buys this stock from Mr. X on 2 January, the benefit of bonus issue or splits or dividend will still be transferred to Mr. X by the company.
A stock split or stock divide increases the number of shares in a company. The price is adjusted such that the before and after market capitalization of the company remains the same and dilution does not occur. Options and warrants are included.
A company generally announces such a date along with the announcement of the bonus issue or splits or dividend announcement, as the case may be.
In an efficient market as per the efficient-market hypothesis (EMH) the effect of the price change due to bonus issue or splits or dividend as on the Book Closure date gets adjusted in the price of the stock in the market effective with the opening of the trade floor on the book closure date.
The efficient-market hypothesis (EMH) is a hypothesis in financial economics that states that asset prices reflect all available information. A direct implication is that it is impossible to "beat the market" consistently on a risk-adjusted basis since market prices should only react to new information. Since risk adjustment is central to the EMH, and yet the EMH does not specify a model of risk, the EMH is untestable. As a result, research in financial economics since at least the 1990s has focused on market anomalies, that is, deviations from specific models of risk.
A stock market, equity market or share market is the aggregation of buyers and sellers of stocks, which represent ownership claims on businesses; these may include securities listed on a public stock exchange, as well as stock that is only traded privately. Examples of the latter include shares of private companies which are sold to investors through equity crowdfunding platforms. Stock exchanges list shares of common equity as well as other security types, e.g. corporate bonds and convertible bonds.
A dividend is a payment made by a corporation to its shareholders, usually as a distribution of profits. When a corporation earns a profit or surplus, the corporation is able to re-invest the profit in the business and pay a proportion of the profit as a dividend to shareholders. Distribution to shareholders may be in cash or, if the corporation has a dividend reinvestment plan, the amount can be paid by the issue of further shares or share repurchase. When dividends are paid, shareholders typically must pay income taxes, and the corporation does not receive a corporate income tax deduction for the dividend payments.
In accounting, equity is the difference between the value of the assets and the value of the liabilities of something owned. It is governed by the following equation:
In finance, an equity derivative is a class of derivatives whose value is at least partly derived from one or more underlying equity securities. Options and futures are by far the most common equity derivatives, however there are many other types of equity derivatives that are actively traded.
A public company, publicly traded company, publicly held company, publicly listed company, or public limited company is a company whose ownership is organized via shares of stock which are intended to be freely traded on a stock exchange or in over-the-counter markets. A public company can be listed on a stock exchange, which facilitates the trade of shares, or not. In some jurisdictions, public companies over a certain size must be listed on an exchange.
A corporate action is an event initiated by a public company that will bring an actual change to the securities—equity or debt—issued by the company. Corporate actions are typically agreed upon by a company's board of directors and authorized by the shareholders. Examples of corporate actions include stock splits, dividends, mergers and acquisitions, rights issues, and spin-offs.
In finance, a convertible bond or convertible note or convertible debt is a type of bond that the holder can convert into a specified number of shares of common stock in the issuing company or cash of equal value. It is a hybrid security with debt- and equity-like features. It originated in the mid-19th century, and was used by early speculators such as Jacob Little and Daniel Drew to counter market cornering.
A treasury stock or reacquired stock is stock which is bought back by the issuing company, reducing the amount of outstanding stock on the open market.
Preferred stock is a form of stock which may have any combination of features not possessed by common stock including properties of both an equity and a debt instrument, and is generally considered a hybrid instrument. Preferred stocks are senior to common stock, but subordinate to bonds in terms of claim and may have priority over common stock in the payment of dividends and upon liquidation. Terms of the preferred stock are described in the issuing company's articles of association or articles of incorporation.
Common stock is a form of corporate equity ownership, a type of security. The terms voting share and ordinary share are also used frequently in other parts of the world; "common stock" being primarily used in the United States. They are known as Equity shares or Ordinary shares in the UK and other Commonwealth realms. This type of share gives the stockholder the right to share in the profits of the company, and to vote on matters of corporate policy and the composition of the members of the board of directors.
An investment trust is a form of investment fund found mostly in the United Kingdom and Japan. Investment trusts are closed-end funds and are constituted as public limited companies. In many respects, the investment trust was the progenitor of the investment company in the U.S.
In financial markets, a share is a unit used as mutual funds, limited partnerships, and real estate investment trusts. The owner of shares in the company is a shareholder of the corporation. A share is an indivisible unit of capital, expressing the ownership relationship between the company and the shareholder. The denominated value of a share is its face value, and the total of the face value of issued shares represent the capital of a company, which may not reflect the market value of those shares.
A dividend reinvestment program or dividend reinvestment plan (DRIP) is an equity investment option offered directly from the underlying company. The investor does not receive quarterly dividends directly as cash; instead, the investor's dividends are directly reinvested in the underlying equity.
A rights issue or rights offer is a dividend of subscription rights to buy additional securities in a company made to the company's existing security holders. When the rights are for equity securities, such as shares, in a public company, it is a non-dilutive(can be dilutive) pro rata way to raise capital. Rights issues are typically sold via a prospectus or prospectus supplement. With the issued rights, existing security-holders have the privilege to buy a specified number of new securities from the issuer at a specified price within a subscription period. In a public company, a rights issue is a form of public offering. Sometimes Right issue can give privileges to people like director, employees those are having some ownership in company to buy the issues.
Share repurchase is the re-acquisition by a company of its own stock. It represents a more flexible way of returning money to shareholders.
A special dividend is a payment made by a company to its shareholders, that the company declares to be separate from the typical recurring dividend cycle, if any, for the company.
Bonus shares are shares distributed by a company to its current shareholders as fully paid shares free of charge.
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