How do Bonus Shares help shareholders? What are they? 

What is bonus share? A “bonus share” is an extra share that a company gives to people who already own shares for free, based on how many shares they already have. People who own shares in a company will get one more share for every share they already own if the company says it is giving a 1:1 bonus. Bonus shares are free for the business because they are paid for with saves.

Companies give extra shares to loyal stockholders as a way to say thank you and make the stock more valuable. Buyers who want to make the most money on their stock purchases look forward to this event the most. 

Which people can get bonus shares?

People who owned shares in the company before the ex-date and record date get a bonus. Most of the time, the record date comes two days after the ex-date. Investors must have held shares before the ex-date to qualify for bonus shares. It is impossible to get bonus shares if someone buys them on the ex-date. What bonus shares are good for and why investors should care about them

There are many benefits, both physical and emotional, to getting bonus shares, such as:

• Gain in Shareholding: As you buy more shares, your ownership in the company becomes bigger.
• Better Liquidity: When companies give out extra shares, they make their stock more liquid, which makes it easier to trade.
• Sign of Good Financial Health: When a company announces a bonus, it’s usually because it’s doing well financially and has extra cash on hand.
• Psychological Boost: Bonus shares often make buyers feel good, making more people want to buy stocks.

It is important to remember, though, that when the number of shares goes up, the price of the stock usually goes up or down by the same amount, so the short-term value of the investment stays the same.

Different Kinds of Bonus Shares 

Bonus shares come in two main types: fully paid bonus shares and partly paid bonus shares.

Fully paid bonus shares: These are bonus shares that are given to shareholders at no extra cost on top of their regular shares in the company. They come from many different sources: cash reserves for capital repayment, profit and loss accounts, investment allowance reserves, security premium accounts, and more. 

Partly-paid bonus shares: A partly-paid share is one for which only part of the issue price is paid during the issue. The rest of the money must be paid back in stages whenever the company that issued the loan “calls” for it. It’s called a partly-paid bonus share when the bonus turns partly-paid shares into fully-paid shares without calling out the rest of the money. They also come from different places, like the general reserve, the investment grant reserve, the growth refund reserve, and so on. 

Final thought

Giving out bonus shares is a strategy businesses use to build a strong reputation, boost market involvement, and strengthen their stock base. People who own shares can get a lot from bonus shares, such as a more liquid stock, more money to spend, loan payments, collateral takeovers, etc. Bonus shares allow the company to raise the price per share without growing their assets, which keeps their debts in check.