Scrip or Bonus Issues

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February 1, 2012 By: , No Comments

Shares are split or bonus shares are offered to reduce the current share price and improve liquidity/marketability. If a share price rises sharply the company may issue free shares to existing shareholders. So, for example, if a shareholder holds 500 shares in a company worth 200p each their holding would be worth £1,000. If the company made a one-for-one scrip issue they would now hold 1,000 shares but they would be worth 100p, The effect of this is that although everything continues as before the share price falls.

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