Definition for : Free share

Free Shares are awarded when there is a Capital increase by incorporation of reserves. Each Shareholder receives free Shares in proportion to his/her current stake in the company. Such transaction results in a mechanical downward adjustment of the Share price, so that the product of the number of Shares before the operation by unit Value of Share is equal to the new number of Shares (thus increased) by new unit Value of Share. This operation is often carried out to increase the liquidity of the Share by decreasing its unit Value.
(See Chapter 23 Options of the Vernimmen)
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