# How does share bonus work?

Contents

## How is bonus share calculated?

Bonus Shares- Calculation

Suppose a shareholder holds 2,000 shares of the company, now when the company issues bonus shares, he will receive 1,000 bonus shares (2,000*½= 1,000).

## What happens when bonus share is issued?

When the bonus shares are issued, the number of shares the shareholder holds will increase, but an investment’s overall value will remain the same. No of shares held before bonus. Several shares held after Bonus. There is a bonus announcement date, ex-bonus date, and record date similar to the dividend issue.

## How are shareholder bonuses given?

The bonus shares are given to the existing shareholders according to their existing stake in the company. Like for example, a company declaring one for two bonus shares would mean that an existing shareholder would get one bonus share of the company for every two shares held.

## Does bonus reduce share price?

So the share price halved after the bonus issue. However, the value of an investment for any shareholder does not decrease in case of a bonus issue. If you held 2 shares before the bonus issue, which means the value of the investment was ₹400 (stock price * shares held). After the bonus issue, you hold 4 shares.

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## Can I sell bonus shares?

In stock splits the shares with a new face value are credited immediately. But in the case of bonus issue, the shares are credited after a few days (usually 15 days) after the ex-date. So, the investor cannot sell the share before it is credited into your Demat account as it may lead to auction.

## Is dividend paid on bonus shares?

Yes. Bonus shares are given by the company as a form of non monetary dividends. This means that, a shareholder will get his/her share of the profits in the form of bonus shares.

## How is bonus different from Split?

A bonus issue is an additional share given to existing shareholders while a stock split is the same share divided into two or more as per the split ratio. Bonus shares are benefiting to existing shareholders while both existing shareholders and potential investors can benefit from the stock split.

## Which company will give bonus share in 2021?

Bonus

COMPANY Bonus Ratio DATE
APL Apollo 1:1 18-09-2021
Kanpur Plast 1:2 16-09-2021
Mahindra Life 2:1 15-09-2021
Mahindra Holida 1:2 09-09-2021

## Why do share prices drop after bonus?

Because issuing bonus shares increases the issued share capital of the company, the company is perceived as being bigger than it really is, making it more attractive to investors. In addition, increasing the number of outstanding shares decreases the stock price, making the stock more affordable for retail investors.

## What are the disadvantages of bonus shares?

The disadvantages of issuing bonus shares are:

• To the company – as issue of this may lead to increase in capital of the company.
• Shareholder expect existing rate dividend per share to continue.
• It also prevents the new investors from becoming the shareholders of the company.
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## Are bonus shares profitable?

Bonus shares are an additional number of shares given by the company to its existing shareholders as “BONUS” when they are not in the position to pay a dividend to its shareholders despite earning decent profits for that quarter.

## Can we buy shares after bonus announcement?

Shares must be bought before the Ex-date because, if you purchase the share on the Ex-date, then it will not be credited to your Demat account on the record date and therefore, you will not be eligible for the bonus share but the person who sold the share to you will be eligible for the same.