Yatırımcı.AI

Bonus share issue (scrip issue)

A bonus issue converts internal resources (retained profit or reserves) into share capital and gives shareholders new shares without payment. In a bonus issue the company transfers equity items such as retained earnings, share premium or revaluation reserves into paid-in capital and distributes free new shares to existing shareholders in proportion to their holdings.
Contents
  1. 1.Key points
  2. 2.Formula / calculation
  3. 3.Interpretation
  4. 4.Pitfalls
  5. 5.Frequently asked questions

Key points

  • No cash leaves or enters the company.
  • A bonus issue is often read as a sign of strong equity and can improve liquidity by lowering the unit price.
  • the "halved" price is not a bargain, and charts without split adjustment show a false collapse.

Formula / calculation

a 100% bonus issue gives one new share for each share held; the share count doubles and the price theoretically halves. New price = Old price / (1 + bonus ratio). Market capitalisation is unchanged.

Interpretation

A bonus issue is often read as a sign of strong equity and can improve liquidity by lowering the unit price. But the shareholder’s wealth does not increase; they simply hold more slices of the same pie.

Pitfalls

the "halved" price is not a bargain, and charts without split adjustment show a false collapse. Expecting the price to return to its pre-bonus level is a common fallacy. Do not confuse it with a rights issue, which does raise cash.

Pages where this term appears

Related terms

Frequently asked questions

A bonus issue converts internal resources (retained profit or reserves) into share capital and gives shareholders new shares without payment.

a 100% bonus issue gives one new share for each share held; the share count doubles and the price theoretically halves. New price = Old price / (1 + bonus ratio). Market capitalisation is unchanged.

Yatırımcı.AI ResearchMethodology