Wipro Shares Show 50% Drop? Real Reason Behind the Price Adjustment

Wipro shares appeared to crash by 50%, causing investor confusion. However, this dramatic drop was a result of price adjustment following the company’s 1:1 bonus issue, not an actual loss in value.

Wipro Shares’ Apparent Drop: What Really Happened?

On December 3, 2024, Wipro Limited shares seemed to take a dramatic dive, showing a 50% drop on several trading apps. While this caused concern among investors, the decline wasn’t due to a genuine fall in the stock’s value but rather an adjustment for a recently announced 1:1 bonus issue.

Wipro shares turned ex-bonus, which means shareholders were entitled to one additional share for every share they held. At the market opening, the shares were trading 1.09% higher at ₹295.50 on the Bombay Stock Exchange (BSE). However, compared to the unadjusted closing price of ₹584.55 from the previous day, the stock appeared to have dropped significantly.

This confusion arose because certain trading apps and brokerage platforms displayed the unadjusted prices from the prior day, creating the impression of a sharp decline.

What Is a Bonus Issue and How Does It Work?

A bonus issue is a corporate action where a company distributes additional shares to its existing shareholders, free of charge, from its accumulated reserves. In Wipro’s case, the 1:1 bonus issue doubled the number of outstanding shares, leading to a proportional decrease in the stock price.

Although the price per share is adjusted, the overall value of an investor’s holdings remains unchanged. For example, if an investor held one share worth ₹584.55 before the bonus, they would now own two shares worth ₹295.50 each, maintaining the same total investment value.

The record date for Wipro’s bonus issue was December 2, 2024. Shareholders on record as of this date are set to receive the additional shares.

Wipro’s History of Bonus Issues

Wipro has a long-standing history of issuing bonus shares to enhance liquidity and reward its shareholders. Some notable bonus issues include:

• 2019: A 1:3 bonus ratio, where one bonus share was issued for every three shares held.
• 2017: A 1:1 bonus ratio, similar to the current issuance.
• 2010: A 2:3 bonus ratio.
• Other bonus issues were announced in 2005, 2004, 1997, 1995, and 1992.

In addition to bonus issues, Wipro has conducted share buybacks to enhance shareholder value and optimize its capital structure.

Financial Impact of the Bonus Issue

As of September 30, 2024, Wipro had reserves of ₹56,808 crore, which included free reserves and securities premiums. Post-bonus, the company’s paid-up equity share capital increased to approximately ₹20,925 crore, with over 10.46 billion shares of ₹2 each in circulation.

The adjustment caused by the bonus issue highlights the need for investors to understand corporate actions and their effects on stock prices.

Conclusion

The apparent 50% crash in Wipro’s share price on December 3, 2024, was not a true reflection of the stock’s performance but a result of the adjustment for the company’s 1:1 bonus issue. Such corporate actions aim to increase share liquidity and reward shareholders, ensuring their investment value remains intact.

Investors are encouraged to verify adjusted prices on reliable platforms and understand the mechanics of corporate actions like bonus issues to avoid confusion in the future.

Disclaimer
This article is for informational purposes only and should not be considered investment advice. Readers are advised to consult their financial advisors before making any investment decisions.