Bonus Issue

Genevieve Wood -

A free issue of shares to shareholders, generally in proportion to the existing shareholding. Although it sounds good, what you really have is more shares worth the same value as the previous shareholding. This sometimes sees a company revalued downwards by the market.

Why do companies do this? Theories include:
-A company may seek to lower its share price to make it more attractive to investors and traders
-A company can use a bonus issue in lieu of increasing dividends
-By increasing issued share capital, a company might become more attractive.

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