Stock Split and Bonus issue: know the difference
- May 25, 2023
- Posted by: admin
- Category: Blog
Introduction
- A stock split is a corporate action in which a company divides its existing shares into multiple shares to boost the liquidity of the shares. It is typically done when a company’s stock price has risen to a level that may be too high for some investors to afford. In essence, a stock split increases the number of outstanding shares while maintaining the market capitalization. This allows investors with smaller budgets to purchase shares, and it also helps to increase the company’s liquidity in the stock market. Stock splits are often seen as a sign of a company’s confidence in its future prospects. For example, a company may do a 2-for-1 stock split, which means that every shareholder would receive an additional share for every share they already own. So, if a shareholder owned 10 shares before the split, they would own 20 shares after the split.
- A bonus issue share is a free issuance of additional shares to existing shareholders in a company. This is usually done as a way to reward shareholders for holding on to their shares for a certain period of time. Bonus shares can be used to increase the liquidity of the company’s stock or to increase the number of shares outstanding. This can also be used to raise capital for the company. Bonus shares are beneficial to shareholders as they increase the value of their existing holdings without having to buy more shares. For example, a company may decide to issue 5 shares for every 10 shares held by the shareholders. So, if a shareholder owns 100 shares, they would receive an additional 50 shares as a bonus issue.
| Company Name | Old Face Value (Rs.) | New Face Value | Split |
|---|---|---|---|
| Radhika Jewel Tech | 10 | 2 | 25-05-2023 |
| Simplex Papers | 10 | 1000 | 25-05-2023 |
| Simplex Mills | 10 | 1000 | 25-05-2023 |
| Hardwyn India | 10 | 1 | 02-07-2023 |
| RadhaGobind Comm | 10 | 1 | 07-07-2023 |
*Disclaimer: “The securities quoted are for illustration only and are not recommendatory”
Bonus Issue:
Here is the list of upcoming bonus stocks in India. These companies have declared bonus shares recently.
| Company Name | Bonus Ratio | Year Ending | Ex-Bonus Ratio |
|---|---|---|---|
| Vardhman Special | 1:1 | 31-03-2022 | 21-06-2023 |
| Hardwyn | 1:1 | 31-03-2023 | 05-06-2023 |
| India Mart Intermesh | 1:1 | 31-03-2022 | 26-05-2023 |
*Disclaimer: “The securities quoted are for illustration only and are not recommendatory”
Difference between stock split and bonus issue
Split stock shares are shares of stock that are divided into smaller pieces. For example, if a company has 1,000 shares outstanding and decides to split them into two, each shareholder will then own 2,000 shares. This can be beneficial to shareholders because it increases the liquidity of the stock, as it can be bought and sold more easily.
Bonus issue shares are shares that are given to existing shareholders for free. This usually occurs when a company has a lot of excess cash and wants to return it to shareholders. This can also be beneficial to shareholders, as it can increase the value of their shares without any additional cost.
The main difference between split stock shares and bonus issue shares is that bonus issue shares are given to existing shareholders for free, while split stock shares are divided into smaller pieces and purchased by existing shareholders at a lower price. Split stock shares are also more liquid than bonus issue shares, since they can be bought and sold more easily.
Conclusion
In conclusion, stock splits and bonus issues of shares can be a great way for companies to reward their shareholders and increase their liquidity. Stock splits can help to reduce the market price of a company’s stock, making it more affordable for smaller investors to purchase shares. Additionally, bonus issues of shares can be a great way for companies to reward their shareholders and provide additional capital for reinvestment. Ultimately, stock splits and bonus issues of shares can be great tools to help a company increase its market capitalization and attract new investors.
