CLAPS Commercial International Bank (CIB) decides to kickstart the procedures of increasing its issued and paid-in capital by 1 billion stock.
How? The capital increase will come through as one bonus share for every two shares. The operation will be financed from the general reserves with a total of EGP 10 billion.
The company can resort to many options to finance its operations. General reserve represents accumulated portions of profit to be used in future contingencies. The company can also issue rights for existing shareholders to hold the company’s stock for a cost less than market price. It can also raise capital by issuing common stocks, or they can seek debt market and propose for a loan.
CIB recorded net income of EGP 13.26 billion in the first 9 months of 2021, opposed to EGP 11.29 billion during the same period of 2020.
Bonus shares? Free stocks are distributions of earnings that a company undertakes in the form of stocks that increase capital. The financing of such operations comes from the general reserve that the company builds by cutting from its annual income on a cumulative basis. When this reserve reaches a pre-specified figure, the company is granted the right to convert it to capital through free stocks.