Bonus Share Issue - What is the value?

[Share Investor]

ARA has just announced a 1-for-10 bonus share issue.

What is the value of bonus share? It just increases the number of shares available and market usually will adjust the price during xb to take into account that.

[Nick]

It is just a share split which help reduces the absolute share price so that retailers can buy shares and also increases liquidity. Of course, no real value is created - just a matter of practicality if the absolute price is too high I guess.

It must be noted that in ARA case - the bonus shares will enjoy the final dividend so it is similar to a dividend increase + reduction of absolute price + increase in liquidity.

[Drizzt]

it works well if the company have high future roe and that its business is good. all in all congrats.

[Salty]

There's a little tiny difference between split and bonus.
Copied from wiki
A bonus share issue is not a dividend. Although these shares are "distributed" from a company to its shareholders, this is almost never a "distribution" in the corporate law sense. That is because they represent no economic event – no wealth changes hands. The current shareholders simply receive new shares, for free, and in proportion to their previous share in the company. Therefore, a bonus share issue is very similar to a stock split. The only practical difference is that a bonus issue creates a change in the structure of the company's shareholders' equity (in accounting). Another difference between a bonus issue and a stock split is that while a stock split usually also splits the company's authorized share capital, the distribution of bonus shares only changes its issued share capital (or even only its outstanding shares).

[FFNow]

You can go to http://blog.shareinvestor.com/share-cons...re-splits/ and look towards the end under "How do Share Splits and Bonus Issues differ?"

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More info on bonus shares - http://blog.shareinvestor.com/bonus-issues/

[Share Investor]

it works well if the company have high future roe and that its business is good. all in all congrats.

Yes, ultimately it depends if a company does well in the long term or not. I remember the last time ARA issued bonus share, the price corrected more than the value of the bonus share.

Vested.

[FFNow]

Yes, ultimately it depends if a company does well in the long term or not. I remember the last time ARA issued bonus share, the price corrected more than the value of the bonus share.

Vested.

Yes this is true. Those who want to enter ARA may want to wait till XB.

[ashparagon]

the bonus shares will enjoy the final dividend so it is similar to a dividend increase + reduction of absolute price + increase in liquidity.

Just to clarify, am I right to say shareholders get a 10% increase in dividend, all else being equal? (10 for 1 bonus shares)

[Nick]

the bonus shares will enjoy the final dividend so it is similar to a dividend increase + reduction of absolute price + increase in liquidity.

Just to clarify, am I right to say shareholders get a 10% increase in dividend, all else being equal? (10 for 1 bonus shares)

That assumes the Company maintains the dividend per share and the XD date is after the receipt of bonus shares. Every situation is unique. Just pay attention to the corporate announcements for the Company of interest to be certain.

[ashparagon]

Thanks for the clarification!