How Bonus Shares Improve Shareholder Value: Minimum Shares You Can Buy

Question: I am curious about is whether my gaining access to bonus shares will improve the shareholder’s value? Does this in turn make a difference to the company? Also I want to know can I buy 4 shares of company. Please share the details on minimum amount of shares I can buy.

Answer: What you have stated is like a two sided coin. On one side, yes, it does improve the shareholder’s value, but this is only in short term. However, the flip side is that in the long run it does not alter the value too much. It is all about one’s perspective.

Say a company is faring well, which means the share value will rocket. From a starting price of Rs10 it might shoot up to $100 or even $1000 over a period of time. And this is when the company issues bonus shares. But under the circumstance where the company decides to hold on the money and not roll out dividends, then it leads to a share split. Many companies opt for giving their shareholders’ a piece of cake as the capital will go up. And this in turn will show in the growth of the company.

Minimum Shares You Can Buy

Yes, You can buy only 4 shares of a company.  Typically, people who trade in shares buy in lots of 100, however unlike Mutual funds, shares can be bought in smaller numbers as well. Whenever a person buys stocks lesser than 100 numbers, it is referred to as “odd lot”.  The minimum trade allowed being 1 share. Smaller share trading is not widely popular primarily because the commission to be paid to the stock broker would work out higher than the price of the share, in certain cases. For example, when a person buys 100 shares of a particular company at X value per share, they are required to pay Y amount as commission, which will help them spread out their share investment. But when 4 shares are purchased, the investor has to pay the same Y amount to the broker as commission. Therefore, it is not something that works to the favor of the investor and will prove quite costly.

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