An issue of shares made by a company free of charge to existing shareholders. Also called bonus issue. An issue of free shares distributed pro rata to existing stockholders instead of a dividend. An offer of free additional shares to existing shareholders, a company may decide to distribute further shares as an alternative to increasing the dividend payout. Also known as a "scrip issue" or "capitalization issue".
New shares are issued to shareholders in proportion to their holdings. For example, the company may give one bonus share for every five shares held.
Ideally, the share price drops the same ratio of bonus issued. For instance, if the company is giving one new share for each four shares own by the shareholders, the share price will drop by 20%.
In fact bonus issue is nothing but a split … however accounting is done on different perspective.
New shares are issued to shareholders in proportion to their holdings. For example, the company may give one bonus share for every five shares held.
Ideally, the share price drops the same ratio of bonus issued. For instance, if the company is giving one new share for each four shares own by the shareholders, the share price will drop by 20%.
In fact bonus issue is nothing but a split … however accounting is done on different perspective.
