We have seen the news that companies in the stock market give bonus shares from time to time. These bonus shares will be issued at par or two or three times more than the shares held by us. No need to pay for these. These are called bonus shares because they are given free of charge.
Why are bonus shares issued?
A company can be profitable. At the same time, funds will be needed to develop the industry. Thus no share in profits i.e. dividend can be given. In return they decide to issue bonus shares to the shareholders. This does not cost money. As a company’s profits increase, so does the company’s balance sheet. Companies can use that balance in three ways. One can pay dividends. The second can be used for corporate expansion. A third bonus can be given as shares.
How to get bonus shares!
A company while announcing bonus shares will announce the rate at which they will be issued and the record date for the same. For example currently Nike has announced bonus shares in the ratio of 5:1. Accordingly, for every Naica share you hold, you will get an additional 5 shares. If you have 100 shares you will have 600 shares after declaring bonus.
Record date is important here. NAICA has announced Nov. 03, 2022 as the record date. Bonus shares will be given to those who have Naica shares in their demat account on that day. In order to have shares on the record date, the shares must have been purchased before 2 business days.
Does bonus shares increase investment?
Getting bonus shares does not change the size of our investment. If you hold shares for one lakh rupees, the account will remain for the same one lakh rupees even after the bonus is paid. But the number of shares will increase according to the size of the bonus. For example, you have bought 100 shares of a company worth Rs.1,000. 5 bonus shares are issued per share. After their issuance, the price per share will be Rs.200 from Rs.1,000.
According to this, only the number of shares will increase. Money invested in shares remains the same. Only those who are going to hold a share for a long time can buy shares on bonus offer. It is not very useful for those who are looking for short term profit.
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