Second Bonus Issue in Quick Time: Retail Investor Trap or Genuine Reward by This Multibagger?

Could this be a genuine move to reward shareholders, or is there something else at play?

In the stock market, there’s always something new and intriguing to uncover. Today, let’s delve into a peculiar and thought-provoking development involving a company that has been catching the attention of many investors. This is the story of Padam Cotton Yarns Ltd, a stock that has delivered jaw-dropping multibagger returns but now finds itself under a cloud of suspicion.

To set the stage, let’s rewind a bit. On November 27, 2024, Padam Cotton Yarns Ltd held a meeting of its Board of Directors and announced a 1:1 bonus share issue, subject to shareholders’ approval. True to its word, the bonus shares were issued on January 8, 2025, marking a significant reward for its shareholders. For context, the company’s stock has surged 2,581 per cent in just three years and delivered an astronomical 700 per cent return in the past year alone. Such phenomenal gains naturally create excitement and FOMO (fear of missing out) among investors.

But here’s where things get interesting—or, should we say, suspicious.

Barely two weeks after issuing the bonus shares, the company released a statement on January 15, 2025, announcing yet another board meeting scheduled for January 24, 2025. The agenda on list? To once again consider and approve a proposal for issuing bonus shares to its equity shareholders.

For those who’ve been following the timeline, this announcement feels puzzling. Why would the company need another bonus share issuance so soon after the previous one? Could this be a genuine move to reward shareholders, or is there something else at play?

Let’s dig deeper.

Despite the fresh announcement, there was no excitement in the stock market. The share price of Padam Cotton Yarns Ltd was locked at the lower circuit, indicating that investors might not be buying into the bonus buzz this time. This stark contrast in sentiment raises a critical question:

Bonus shares are undoubtedly appealing. They create a perception of value without immediately affecting the intrinsic worth of the company. However, when a company issues bonuses in quick succession, it can also signal a lack of sustainable growth strategies or, worse, an attempt to manipulate market sentiment.

Is the company trying to lure retail investors into a trap using the allure of bonus shares, a hot trend on Dalal Street these days?

What do you think—is this a genuine reward or a clever distraction? Share your thoughts!

Disclaimer: The article is for informational purposes only and not investment advice.