understanding financial jargon
A Bonus Issue is where a company gives away free shares to existing shareholders. This is common among British companies and the objective is to make the shares more 'liquid' by reducing the average price. No new cash is raised for the issuer since there is no requirement for existing shareholders to pay for the bonus shares. In this respect, it is not to be confused with a rights issue where an existing investor is given the right to purchase new shares in a company.
A similar method of reducing the average share price would be by performing a stock split. In either case the liquidity of a share is only increased because of investor psychology, since the monitory value of an exisiting investment in the company does not change.
What to do if you need more help
If you need more help with your specific commercial loan, mortgage or insurance requirement please speak to a professional financial adviser.
We hope you found this information useful.
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