Life Insurance Corporation of India shares appeared to crash by approximately 50% on May 30, 2024, following a 1:1 bonus issue adjustment [1].
This movement is significant because it may alarm retail investors who see a sharp price drop without understanding the accounting mechanics of bonus shares. While the per-share price decreased, the total value held by shareholders remains unchanged because they receive additional shares to offset the price decline.
The state-owned insurer saw its share price hit an intraday low of Rs413 [3]. This represents a 50.2% downside [3] when compared to the previous close price of Rs830 [3].
The decline is a mechanical effect of the 1:1 bonus issue. In such an arrangement, the company issues one additional share for every single share held by an investor. Because the total market capitalization of the company does not change during this process, the price per share is effectively halved to account for the doubling of the number of shares in circulation [1], [2].
Market analysts said that this adjustment is a standard procedure in the Indian stock market on the National Stock Exchange and Bombay Stock Exchange. The perceived crash is an accounting adjustment rather than a loss of company value or a reaction to negative financial news [1], [2].
Investors who held shares prior to the record date now possess more units of the stock. This ensures that the overall investment value is preserved despite the lower price per individual share [1].
“The decline is an accounting adjustment, not an actual loss.”
This event highlights the difference between a market-driven price collapse and a corporate action adjustment. A bonus issue is often used by companies to make shares more affordable for small investors by increasing liquidity without diluting equity or spending cash. In this case, the 50% drop was a mathematical necessity of the 1:1 ratio, not a reflection of LIC's operational health.
