Shares of the Life Insurance Corporation of India (LIC) appeared to fall nearly 50% [1] on Friday following a technical price adjustment.
The movement caused temporary confusion among investors, as the sharp drop in share price was not a result of market panic or company failure. Instead, the decline reflected a corporate action designed to increase the number of shares held by investors.
The apparent plunge was the result of the company's first-ever 1:1 bonus issue [2]. Under this arrangement, the company provides one bonus share for each existing share held by an investor [2]. This process increases the total number of shares in the market, which naturally lowers the price per individual share to maintain the company's overall market capitalization.
While the ticker showed a steep decline, the actual market price of the shares fell by only around 1.5% [1]. The record date for this corporate action was May 29 [2].
In addition to the bonus issue, the company announced a dividend payout of Rs 261 per share [3]. These combined actions, the bonus issue and the dividend, are common tools used by large corporations to manage their stock liquidity and reward shareholders.
Market analysts said that the 50% figure seen on trading screens was a mathematical byproduct of the bonus ratio. Because shareholders now own twice as many shares, the value of each single share is roughly halved, though the total value of the investor's holding remains largely unchanged, minus the actual 1.5% [1] market dip.
“The apparent plunge was the result of the company's first-ever 1:1 bonus issue.”
This event highlights the difference between a 'price crash' and a 'technical adjustment.' A bonus issue is not a loss of value but a redistribution of equity; it makes shares more affordable for retail investors by lowering the entry price per share while increasing the total volume of shares available in the market.
