By Coreen Madanha
As your financial grove matures, the companies you own may decide to “prune” or “graft” their shares. These are known as Corporate Actions. Last week, we learned how to value a share; this week, we look at how the company manages those shares. While the names may sound complex, they are simply methods used to ensure the garden remains accessible and healthy for every gardener involved in the venture.
One common action is a Share Split. If our Cake Company’s share price becomes too high say $100 it becomes difficult for small investors to buy in. The company may “split” one share into ten shares worth $10 each. You still own the exact same amount of the company, but the smaller slices make the market more “liquid.” This allows more people to participate, which often increases the overall vibrancy of the share’s performance on the exchange.
Alternatively, you may receive Bonus Shares. This occurs when a company has a surplus of “seeds” (retained earnings) and chooses to reward its shareholders by giving them extra shares for free. This is a significant “thank you” to loyal owners. While it doesn’t change the company’s total value instantly, it increases the number of “fruit-bearing branches” you own. This is a sign of an organisational strength that speaks to the company’s long-term stability.
Lastly, we have Rights Issues. If a company needs to raise fresh capital to build a new factory, they might offer you the “right” to buy new shares at a special discounted price before the public. It is your privilege as an existing owner to have first choice. This ensures your Oak grows in proportion to the company’s expanding horizons.
All these structural changes are designed to prepare the tree for its most important phase: the season of the harvest. Once the grove is properly managed and the shares are correctly structured, we can finally look forward to the rewards of our patience. Join us next week as we celebrate the ultimate goal of every investor which is the harvest of dividends.
Coreen Madanha is the Managing Director for InvestIQ Oak Wealth (Private) Limited, which is a registered member of the Zimbabwe Stock Exchange (ZSE) and is licensed by the Securities and Exchange Commission of Zimbabwe (SECZ).
