TCS stocks went down 50% on Jun 16 !




What has caused the 5o% drop in price?

The 1:1 bonus share issue has caused this proce correction.

India's top technology outsourcer Tata Consultancy Services (TCS) announced its results for the quarter ended March 31, 2009.The net profit rose 7 percent to Rs.1333crore and the board of directors has recommended a final dividend of Rs.14 per share for FY09 and 1:1 bonus share.

This is the second bonus issue by the company since it went public five years ago. The last time that the company came out with a bonus issue was in April 2006, which was also a one-for-one issue.

Tata Consultancy Services (TCS) has fixed Jun 17 as record date for bonus issue.
Since bonus share has been declared there has to be a correction in price right?
the correction factor for ratio A:B is (A+B)/B
Since the ratio here is 1:1 it would be (1+1)/1=2.

So the stock price after bonus will be
Previous close price/ correction factor = 778.60/2 = 389.3
Hence the 50% drop!