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Bonus Issue

A bonus issue is also described as a free issue, a scrip issue, a capitalisation issue and a stock dividend . These are new shares issued by a company to its existing shareholders, usually in a mathematical proportion to the number of shares already held. These shares are issued free of charge as an accounting exercise by the company. However the share price will reduce depend on the number of shares issued and the value of the holding will remain the same.

What the company is doing is turning part of the profits and reserves it will have accumulated into capital. The company may also be undertaking the exercise to reduce the unit price of its shares in the market to make them their less expensive and affordable to the smaller investors.

Dividends per share will fall in proportion to the number of bonus shares issued. The term free issue, which is sometimes used to describe bonus shares, is in fact misleading.

See our Bonus Issue Calculator

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  1. What is the effect of warrants exercise prices in the situation of the company is exercising bonus issue . Exercise price will remain the same or it will change accordingly?

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