ASG Plastic Factory to double shares after CMA nod

The Capital Market Authority approved ASG Plastic Factory Co.'s plan to double its capital through a bonus share issue. The company will increase share capital from SAR 70.5 million to SAR 141 million.

The increase is funded by transferring SAR 70.5 million from retained earnings. ASG will issue 7.05 million new shares at a par value of SAR 10 each. Each existing shareholder will receive one new share for every share held.

A bonus issue does not change the company's total market value. The stock price adjusts downward proportionally on the ex-date. Existing holders end up with more shares worth the same aggregate amount. No cash leaves the company or reaches shareholders.

Companies often use bonus issues to signal confidence in their financial position. ASG's decision to tap its retained earnings – accumulated profits not distributed as dividends – suggests the board sees a strong balance sheet. The move also puts the stock at a lower nominal price, which can attract retail investors in markets like Saudi Arabia where per-share price matters for accessibility.

The approval is valid for six months. ASG has not yet set a record date or a timeline for the capital increase. Shareholders will need to vote on the resolution at an extraordinary general meeting before the shares are distributed.

For existing holders, the bonus offers a paper gain and a larger position. The real test will be whether the stock can trade above the adjusted reference price after the distribution. That depends on operational performance and broader sentiment toward the plastics sector, not the capital structure change itself.