How is stock rights offering calculated? A retail investor's blood and tears experience.

I have been managing my account for many years, and the issue of stock allocations has always been a love-hate relationship for me. I remember when I first entered the market, seeing "stock allocation at 1 dollar" made me ecstatic, fantasizing about a windfall of cash, but I almost got played for suckers! Today, I want to share with everyone the true method of calculating stock allocations, so you won't be misled like I was back then!

Equity Distribution Calculation Formula: It's actually super simple!

The calculation for stock distribution is to multiply the amount allocated per share by the number of shares you hold, and then multiply by 0.1 to obtain the number of shares distributed. To put it simply:

Number of shares distributed = Amount per share distributed × Number of shares held × 0.1

For example, if you have 100 shares of a certain company and it says there is a share distribution of 1 yuan, then: 1 × 100 × 0.1 = 10 shares

Yes, you will only get 10 shares, not receive 100 dollars in cash!

There is a common misconception here: the stock distribution rate is calculated based on the par value per share, which in Taiwan is usually 10 dollars, so distributing 1 dollar of stock is equivalent to distributing 0.1 shares per share.

Real Case: My Painful Lesson

Last time I bought 1,000 shares of a certain financial holding stock, I saw the announcement "stock dividend of 0.5 yuan" and excitedly told my friends that I would receive 500 yuan in dividends. As a result, after the ex-dividend date, I only received 50 new shares, and the stock price dropped directly! That's when I understood that the so-called "stock dividend" is not about cash distribution, but rather giving me more shares!

Moreover, what's even worse is that those newly allocated stocks also have odd lots, and the transaction fee percentage is even higher when sold, which is just adding insult to injury!

Stock Distribution and Dividend Distribution: Who Benefits More?

I personally prefer cash dividends, after all, money in hand is real and can be used freely. Although companies like to promote that "stock distribution represents confidence in the future," in reality, it is often because the company is tight on cash flow that they choose to "save money" by distributing stocks.

Moreover, after the rights issue, the total share capital of the company increases, and your shareholding percentage is effectively diluted. The company's assets do not increase, and the stock price drops due to the ex-rights. To be honest, many times the rights issue is just a number game, with no real benefits.

In recent years, how many of those major companies that issued additional shares have successfully "filled the rights"? Very few! On the contrary, high-quality stocks with stable dividends have been able to rise steadily in the long term.

Stock Allocation Investment Strategy: My Unique Insights

When I see the company is going to issue shares, I pay special attention to:

1. After the rights issue, can the rights be filled? If historically the stock price continues to fall after a rights issue, then stay away from this stock!

2. Why is there no dividend distribution with the stock allocation? Is the company's cash flow problematic? Sometimes stock allocation is just covering up a cash flow crisis.

3. Mixed distribution (part cash + part stock) is usually a better choice, at least you can still get some cash.

Final reminder, after the announcement of stock allocation news, don't rush to buy before the ex-dividend date. I've seen too many people trying to "pick up bargains" end up buying at high points! Stock prices often continue to probe lower after the ex-dividend date, so patience is key to finding the real good price.

Stock allocation is like paper wealth; it looks like you have more shares, but your pocket hasn’t gained a single dime. True investment should focus on the company's fundamentals rather than being deceived by short-term stock allocation gimmicks!