Finally, the share certificates are issued.<\/li>\n<\/ul>\n\n\n\nThe impact of bonus shares on shareholders and the company\u2019s stock price<\/h3>\n\n\n\n
The issue of such shares does have an impact on shareholders and the company\u2019s stock price. It is important to understand what its impact looks like from various points of view.<\/p>\n\n\n\n
Firstly, we begin with the investors\u2019 point of view. The shareholders do not need to pay additional charges to receive bonus shares. However, the prices of each share fall. So, such shares mainly help if you are a long-term shareholder.<\/p>\n\n\n\n
From the company\u2019s point of view, these shares help defer the pressure of paying the shareholders cash dividends. Also, they can enhance the company\u2019s reputation.<\/p>\n\n\n\n
Eligibility and allotment of bonus shares<\/h2>\n\n\n\n
Now that you know what a bonus share is, it is important to also be aware of the eligibility criteria and allotment process for these shares.<\/p>\n\n\n\n
Eligibility criteria<\/h3>\n\n\n\n
The eligibility for these shares mainly depends on the shareholder\u2019s ex-date and record date. The record date is when the company checks its records to identify eligible shareholders. The ex-date is the day before the record date.<\/p>\n\n\n\n
To be eligible for these shares, the shareholder must buy a share before the ex-date.<\/p>\n\n\n\n
The allotment process<\/h3>\n\n\n\n
The allotment of bonus shares usually depends on the company. Every company might have a different process, but usually, it is pretty much along the following lines. A board meeting is conducted, a general meeting is called for, form number PSA-3 is filled, and such shares are issued.<\/p>\n\n\n\n
Such shares are of two types: fully-paid and partly-paid ones. You can issue fully paid these shares from the profit and loss account, capital reserves, capital redemption reserves, and the security premium account.<\/p>\n\n\n\n
The role of the board of directors in the issue<\/h3>\n\n\n\n
The board of directors plays a vital role in the issues of these shares. First, they are part of the board meetings where the agenda of these shares are placed. Then after a brief discussion occurs between them, they are asked to present their opinions. It on the basis of these opinions that a general meeting is called for. Only then is the approval notice for such shares sent to the members responsible.<\/p>\n\n\n\n
Impact on shareholders<\/h2>\n\n\n\n
Bonus shares have a more significant impact on shareholders, so let\u2019s take a moment to focus on that a little more in this section.<\/p>\n\n\n\n
The impact of bonus shares on shareholders\u2019 equity<\/h3>\n\n\n\n
These shares are free of cost. Shareholders hold extra shares through them. It doesn\u2019t dilute the equity of other shareholders.<\/p>\n\n\n\n
The impact of bonus shares on dividends<\/h3>\n\n\n\n
Just like other shares, the value of the shares you receive as a bonus can always increase or decrease in the future. When that happens, it can affect the dividends you receive from it.<\/p>\n\n\n\n
The impact of bonus shares on the number of shares outstanding<\/h3>\n\n\n\n
The outstanding shares of a shareholder are increased in the company. However, as it decreases the stock price, the shares are less valuable for a while.<\/p>\n\n\n\n
Impact of bonus shares on the company\u2019s financials<\/h2>\n\n\n\n
To fully understand the impact of bonus shares on the company\u2019s financials, read the description below.<\/p>\n\n\n\n
Impact on the company\u2019s balance sheet<\/h3>\n\n\n\n
The \u201cprofits for distribution\u201d transforms into \u201cshare capital\u201d of equivalent value due to the bonus shares on the balance sheet.<\/p>\n\n\n\n
Impact on the company\u2019s EPS<\/h3>\n\n\n\n
Bonus shares cause the company\u2019s Earnings Per Share (EPS) to be perceived as that of a much bigger company than before. Because the total issued shares increase with the bonus shares on the scene.<\/p>\n\n\n\n
Impact on the company\u2019s market capitalization<\/h3>\n\n\n\n
The increase in outstanding shares impacts the share price. As a result, the price of shares decreases for retail investors; they become much cheaper and more affordable.<\/p>\n\n\n\n
Bonus share vs. Stock split<\/h2>\n\n\n\n
Comparing contrasting things can help us comprehend each of those things better. Looking at such shares vs. stock split, too, can be a useful way to ensure you understand each of them. So that\u2019s what we will try to do in this section.<\/p>\n\n\n\n
The difference between bonus shares and stock split<\/h3>\n\n\n\n
So, by now, you know that such shares are additional shares that a company distributes to its existing shareholders. But do you know what a stock split is? Like bonus shares, it, too, is a corporate action. But with this action, the company basically splits its outstanding share into multiple shares. That means the face value of each share decreases in proportion to the stock split ratio. This doesn\u2019t happen in the case of bonus shares.<\/p>\n\n\n\n
So bonus shares are mainly beneficial for existing shareholders. But stock splits work well for new shareholders, too.<\/p>\n\n\n\n
The impact of each on shareholders and the company<\/h3>\n\n\n\n
Such shares are great for existing shareholders, as they do not have to pay extra charges. Meanwhile, the company too can secure its position if a cash dividend shortage occurs.<\/p>\n\n\n\n
Stock splits, on the other hand, are suitable for existing as well as new shareholders. On the company front, one sees a division of outstanding shares in proportion to the increase in the number of shares.<\/p>\n\n\n\n
Their suitability for a company\u2019s capital structure<\/h3>\n\n\n\n
These shares and stock split are both beneficial for the company. They increase the company\u2019s value in the long term, let people perceive it in a better light, increase the number of shareholders, and much more.<\/p>\n\n\n\n
How to evaluate their suitability for your investment needs<\/h3>\n\n\n\n
The suitability of these shares and stock split depends on your investment horizon. If you are looking at short-term spot trading, then the fall in prices with both options is a bad thing. If you are willing to wait it out, though, the price fall is only likely to be temporary. So just make sure you pick a company with a solid reputation and past performance.<\/p>\n\n\n\n
FAQs<\/h2>\n\n\n\n
\n
\n
What do you mean by bonus shares?<\/h3>\n\n\n
Bonus shares are additional shares distributed by a company to its existing shareholders at no extra cost. This increases the total number of shares held by shareholders.<\/p>\n\n<\/div>\n<\/div>\n
\n
Is bonus shares good to buy?<\/h3>\n\n\n
Investing in bonus shares can be advantageous. It increases the number of shares without extra cost, making it attractive for investors seeking to multiply their investment.<\/p>\n\n<\/div>\n<\/div>\n
\n
Who are eligible for bonus shares?<\/h3>\n\n\n
Existing shareholders are eligible for bonus shares. To qualify, they must hold shares before the ex-date; buying shares on the ex-date disqualifies them.<\/p>\n\n<\/div>\n<\/div>\n
\n
What is 2:1 bonus share?<\/h3>\n\n\n
In a 2:1 bonus share, shareholders receive two additional shares for every one share held. It’s a ratio indicating the number of bonus shares distributed.<\/p>\n\n<\/div>\n<\/div>\n<\/div>\n<\/div>","protected":false},"excerpt":{"rendered":"
A lot of people are unaware of what bonus shares are. If you\u2019re one of them, well, you don\u2019t have to be. Ignorance is a choice, and so is knowledge. We hope you make the right one today. And if you\u2019re saying yes to knowledge, give this write-up a thorough readthrough. Understanding bonus shares If […]<\/p>\n","protected":false},"author":93,"featured_media":33008,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_ayudawp_aiss_exclude":false,"footnotes":""},"categories":[10644,7362],"tags":[10699,10675],"class_list":["post-31403","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-indian-stocks","category-personal-finance","tag-bonus-shares","tag-indian-stocks"],"acf":{"json_ld_schema":"\n[{\"@context\":\"https:\/\/schema.org\",\"@type\":\"FAQPage\",\"@id\":\"https:\/\/coinswitch.co\/switch\/us-stocks\/what-are-earnings-per-share-eps\/#FAQPage\",\"headline\":\"What are Earnings Per Share (EPS)? - CoinSwitch\",\"keywords\":\"Earnings Per Share (EPS), US Stock Markets, \",\"datePublished\":\"2023-03-06T18:05:41+05:30\",\"dateModified\":\"2023-03-06T18:05:41+05:30\",\"dateCreated\":\"2023-03-06T18:05:41+05:30\",\"author\":{\"@type\":\"Person\",\"name\":\"Team CoinSwitch\",\"description\":\"\",\"url\":\"https:\/\/coinswitch.co\/switch\/author\/csk\/\",\"sameAs\":[],\"image\":{\"@type\":\"ImageObject\",\"url\":\"https:\/\/secure.gravatar.com\/avatar\/6433d7bf18da72cb201be50b7552558f?s=96&d=mm&r=g\",\"height\":96,\"width\":96}},\"image\":[{\"@type\":\"ImageObject\",\"@id\":\"https:\/\/coinswitch.co\/switch\/us-stocks\/what-are-earnings-per-share-eps\/#primaryimage\",\"url\":\"https:\/\/coinswitch.co\/switch\/wp-content\/uploads\/2023\/03\/Generic_Lede_6-3.jpg\",\"width\":\"1800\",\"height\":\"1080\"},{\"@type\":\"ImageObject\",\"url\":\"https:\/\/coinswitch.co\/switch\/wp-content\/uploads\/2023\/03\/Generic_Lede_6-3-1200x900.jpg\",\"width\":\"1200\",\"height\":\"900\"},{\"@type\":\"ImageObject\",\"url\":\"https:\/\/coinswitch.co\/switch\/wp-content\/uploads\/2023\/03\/Generic_Lede_6-3-1200x675.jpg\",\"width\":\"1200\",\"height\":\"675\"}]}]\n","json_ld_custom_schema":"","youtube_vodeo_url":"","seo":{"title":"","keywords":"","description":"","canonical":""},"blog_banner_image":false,"blog_coin":false,"download_the_app":{"button_value":"","button_url":""},"twitter_card":{"twitter_title":"","twitter_description":"","twitter_link":""},"maturity_tag":"Beginner","post_author":[112],"guest_author":false,"hide_toc":false,"select_disclaimer":"Disclaimer: Risk is fundamental to the investment process in Indian stocks. Any discussion of securities in this article should not be considered a recommendation to buy or sell any security. The facts provided are for informational purposes only and should not be considered investment\/financial advice from CoinSwitch.","key_takeways":false},"post_mailing_queue_ids":[],"_links":{"self":[{"href":"https:\/\/coinswitch.co\/switch\/wp-json\/wp\/v2\/posts\/31403","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/coinswitch.co\/switch\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/coinswitch.co\/switch\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/coinswitch.co\/switch\/wp-json\/wp\/v2\/users\/93"}],"replies":[{"embeddable":true,"href":"https:\/\/coinswitch.co\/switch\/wp-json\/wp\/v2\/comments?post=31403"}],"version-history":[{"count":4,"href":"https:\/\/coinswitch.co\/switch\/wp-json\/wp\/v2\/posts\/31403\/revisions"}],"predecessor-version":[{"id":38829,"href":"https:\/\/coinswitch.co\/switch\/wp-json\/wp\/v2\/posts\/31403\/revisions\/38829"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/coinswitch.co\/switch\/wp-json\/wp\/v2\/media\/33008"}],"wp:attachment":[{"href":"https:\/\/coinswitch.co\/switch\/wp-json\/wp\/v2\/media?parent=31403"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/coinswitch.co\/switch\/wp-json\/wp\/v2\/categories?post=31403"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/coinswitch.co\/switch\/wp-json\/wp\/v2\/tags?post=31403"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}