Why consolidation of shares is done

A share consolidation occurs when a company decreases the number of shares it has on issue. This causes the share price to increase proportionally, so that the value of each shareholders' holding remains unchanged relative to the market capitalisation of the company.

Technically nothing really changes. You own of those shares. Now, the company does a share consolidation. It merely alters the number of shares and the nominal value of each share. This may be seen as too low a price per share. Each shareholder will, after the consolidation, have fewer shares but still own the same percentage of the shares.

Share consolidations will often be to consolidate every 2 existing shares into 1 share 2 into 1 , 10 into 1 share or into 1 share but can be to consolidate every 7 existing shares into 5 new shares. These remainder shares will need to be dealt with. Before the share consolidation, Selina had 50 shares. In exchange for 49 of the original shares, she receives 35 of the new shares. In this type of case, the company will often purchase and immediately cancel the remainder shares.

In some cases, the shareholder will receive a payment for them. Publicly quoted companies will sometimes do share consolidations to increase the underlying share price in an effort to make them more attractive to investors. The investor would have the same interest in the company but just a lower number of shares with a higher nominal value.

Here we set out the simple steps for you to complete when your company is consolidating one of its share classes, which mirror those for a share split.

However, you will need to check that they do not restrict or exclude the right to consolidate. It is common for a support level to become the new resistance point after a bearish breakout and for a resistance level to form support after a bullish breakout. Sometimes consolidations show triangle or pennant patterns, making it possible to execute continuation strategies. Before determining how to trade a consolidation, identify how long the pattern has held.

There are no appreciable time restraints on a consolidation. Intraday consolidation can last for only a few minutes or hours. If you look for active intraday trading, consult technical analysis software for dynamic information updates. Some consolidation patterns last for days, weeks, or even months or years.

These patterns are susceptible to false breakouts, making it important to seek confirmation of prices before looking to capitalize on a trend.

Countertraders and contrarians can still trade on narrowly consolidated stocks, but there is often less room for profit due to the small range. Technical Analysis Basic Education. Your Privacy Rights. To change or withdraw your consent choices for Investopedia. At any time, you can update your settings through the "EU Privacy" link at the bottom of any page. These choices will be signaled globally to our partners and will not affect browsing data.

We and our partners process data to: Actively scan device characteristics for identification. I Accept Show Purposes. Conversion of fully paid-up share capital into stock or Vice versa; 4. Diminution of un-subscribed share capital. ELCs have two options i. SEBI vide its circular bearing no. Face value per share in Rs. Paid-up capital in Rs. Existing position of share capital 4,84, 10 48,44, Proposed position of share capital 80 60, 48,44, Consolidation of equity share into one equity shares.

CPEL in its EGM dated 14 th April, , had passed a resolution whereby the aforesaid scheme of consolidation of share capital was approved, additionally it was decided that no shareholders would be entitled to get fractional shares, and these fractional shares would be consolidated and sell the shares and proceeds of such shares shall be distributed among the entitled shareholders proportionately. Pre consol-idation Share-holding 4,84, shares Pre cons-olidation voting rights Post consol-idation Share-holding 80 shares Post conso-lidation voting rights Mr.

A 2. B 1. During hearing of the application, some shareholders had filed objections, and in preview of these objections NCLT had disapproved the said scheme of consolidation.