Bonus Shares

[fivestar110]

What is Bonus Share.

[dzug]

In what context?

[CovKid]

A bonus share issue is sometimes called a "scrip" issue. A company might issue bonus shares as 1 for 3 or 1 for 5 etc. It means if you hold 3 (or 5) shares they give you an extra one. However, they do not really "give you anything except a piece of paper. In the 1 for 3 case, if your shares were worth �4 each (market value as per stock exchange, NOT the value on the share certificate) they will be worth �3 after the issue. You will have 4 x �3 shares instead of 3 x �4 shares; still worth �12 in total. (In practise the numbers do not always work out quite like that; share prices change day by day but the "theoretical" prices will be pretty close to actual prices.) Why bonus shares? sometimes argued that by reducing the share price they become more marketable. Sometimes it is to transfer reserves to share capital on Bal. Sheet. It is purely a paper/bookeeping exercise. You get nothing for free!