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http://mrunal.org/2012/04/economy-shares-vs-stocks-rights-issue.html
Bonus shares
In the debt versus equity article, you saw that a company can collect money from people
by issuing shares (IPO/Equity/Stock whatever you want to call it), but every year, company
reports the profit to the board of directors. The board of directors will decide how much
profit is to be re-invested in the company and how much profit is to be shared with the
shareholders.
The profit, thus shared with the shareholders is called dividend. Generally dividend is
sent to the shareholders via cheques.
But sometimes,company also gives you extra shares.
It means company paid the money to purchase shares on your behalf and gives it to you.
So you got free shares and next year when company distributes the dividends (cash), you
will get more dividend, because now you are holding more shares. Alternatively, you can
sell away these bonus shares to someone else and take out the money.
These are called bonus shares
What is the difference between Bonus shares and rights issues
Well, as a shareholder, you get shares for free under bonus shares.
But youll have to pay money for buying new shares under rights issue
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April 26th, 2012 | Category: Economy