By issuing bonus shares, the number of outstanding shares increases, but each share’s value reduces, as shown in the example above. The face value remains unchanged.
A company issues bonus shares for their shareholders in order to increase the liquidity of the stock as well as with the aim to decrease its stock price to make it affordable for investors. Bonus shares are fully paid additional shares issued by a company to its existing shareholders.
It is beneficial for the long-term shareholders of the company who want to increase their investment. … Bonus shares give positive sign to the market that the company is committed towards long term growth story. Bonus shares increase the outstanding shares which in turn enhances the liquidity of the stock.
Companies issue bonus shares to encourage retail participation and increase their equity base. When price per share of a company is high, it becomes difficult for new investors to buy shares of that particular company. Increase in the number of shares reduces the price per share.
In India, delivery of the shares in the Demat account happens after T+2 days. So, in case you don’t hold any shares of the distributing company, you must buy the shares two days before the record date, in order to turn eligible for the acquisition of bonus shares. The Ex-date is one day before the record date.
Bonus
| COMPANY | Bonus Ratio | DATE |
|---|---|---|
| GEE | 1:10 | 21-09-2021 |
| TPL Plastech | 1:1 | 16-09-2021 |
| APL Apollo | 1:1 | 16-09-2021 |
| Apollo Tricoat | 1:1 | 16-09-2021 |
The disadvantages of issuing bonus shares are:
- To the company – as issue of this may lead to increase in capital of the company.
- Shareholder expect existing rate dividend per share to continue.
- It also prevents the new investors from becoming the shareholders of the company.
Bonus Shares are being issued on the recommendation of the Board and been authorized in the general meeting of the company; … The partly paid-up shares, if any outstanding on the date of allotment, are made fully paid-up; 6.
A bonus issue is when current shareholders are granted an additional share, whereas a stock split is when the same share is divided into two or more shares according to the split ratio. Existing shareholders benefit from bonus shares, and stock splits benefit both existing shareholders and new investors.
Bonus shares are available to shareholders who own the firm’s stock prior to the record date and the ex-date determined by the company. For the delivery of shares in India, the T+2 rolling system is used, in which the ex-date is two days before the record date.