corporate-actions
More units is not more wealth
The rule
More shares is not more wealth, unless your real claim on the business changes. A 1:1 bonus doubles your pieces, not your ownership.
Where it flips
A corporate action can still matter when it changes how easily you can sell, your tax timing, control, or the debt-and-equity mix. Where it misleads: you read only the share count. The fix: look past the number of pieces to what really changed.
Splits, bonuses, dividends, and rights issues change the container, not always the contents. So the reader must ask what actually happened to ownership, to cash, to what the company owes, and to the price. Count the real claim, not just the number of pieces.
A worked example
A 1:1 bonus doubles your share count and roughly halves the value shown per share. You now hold more pieces, but not automatically more claim on the business. [illustrative]
How to spot it
- ·the share count changes
- ·the price adjusts to match
- ·cash actually leaves the company
- ·a rights issue asks you for fresh cash
Benjamin Graham · The Intelligent Investor