Issue #21 - What is the difference between bonus issue and stock split?
Although this issue does not contain much buffettology value, I was curious to find out about bonus issue this weekend. So here's some information to share.
Bonus issue - http://www.investopedia.com/terms/b/bonusissue.asp
Bonus issues are shares issued to existing shareholders as a result of capitalisation of reserves. It increases the number of outstanding shares of the company. Amount of outstanding share of a company increased by the amount of bonus shares issued. E.g. a 1-for-1 bonus issue effectively doubles the outstanding shares. Bonus issues are additional shares given to existing shareholder at the expense of the company's cash. The amount of paid-up share capital of the company increases due to issuant of bonus issues. Example case, SP Setia issued 151,759 1-for-1 bonus issues during its financial year ending Oct 31, 2000. As a result the company's share capital increased RM151,759 as reflected in its balance sheet FY2000 and a decreased of RM151,759 in its share premium account.
Stock split - http://www.investopedia.com/terms/s/stocksplit.asp
Share Splits is the change in face value of a stock. In a share split the par value per share is reduced and the number of shares is increased proportionately resulting in no change in the share capital of the company. Amount of outstanding share of a company increases as well when stock splits. E.g. a 2-for-1 stock split also doubles the outstanding shares. Example case, paid-up share capital of Public Bank remained the same value after a reverse stock split exercise in year 2004. Further information on the proposed of reverse stock split available here.
Bonus issue - http://www.investopedia.com/terms/b/bonusissue.asp
Bonus issues are shares issued to existing shareholders as a result of capitalisation of reserves. It increases the number of outstanding shares of the company. Amount of outstanding share of a company increased by the amount of bonus shares issued. E.g. a 1-for-1 bonus issue effectively doubles the outstanding shares. Bonus issues are additional shares given to existing shareholder at the expense of the company's cash. The amount of paid-up share capital of the company increases due to issuant of bonus issues. Example case, SP Setia issued 151,759 1-for-1 bonus issues during its financial year ending Oct 31, 2000. As a result the company's share capital increased RM151,759 as reflected in its balance sheet FY2000 and a decreased of RM151,759 in its share premium account.
Stock split - http://www.investopedia.com/terms/s/stocksplit.asp
Share Splits is the change in face value of a stock. In a share split the par value per share is reduced and the number of shares is increased proportionately resulting in no change in the share capital of the company. Amount of outstanding share of a company increases as well when stock splits. E.g. a 2-for-1 stock split also doubles the outstanding shares. Example case, paid-up share capital of Public Bank remained the same value after a reverse stock split exercise in year 2004. Further information on the proposed of reverse stock split available here.
posted by yitping at 2:25 PM
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