Bonus Issue

A bonus issue is a corporate action in which the company’s existing shareholders get additional shares at no extra cost. However, this depends on the number of shares a shareholder owns. For instance, if a company offers a 1:1 bonus issue, it means that the shareholders will get one share for each share held by them. But this increase in the number of shares doesn’t affect the value of the company or the total value of shares held by the shareholder. This is because after a bonus issue, the stock price generally falls in the same proportion as the bonus issue. For example, after a 1:1 bonus issue, the stock price will be reduced to half.

Answered on 2022-07-22