Bonus Shares News: Investors beware! If you are misunderstanding bonus shares, first understand the actual math of ‘bonus’

• Are bonus shares a free gift or an investment ploy?
• Bonus share benefit to shareholders?
• Bonus shares also show confidence in the company

Bonus Shares News: Those who invest or are interested in the Indian stock market must have heard about bonus shares. But is this a free gift to investors or something more? What is share bonus and does it benefit or harm investors? Let’s know in detail in this full news..

What is bonus share?

Bonus shares are additional shares that a company issues to its existing shareholders at no additional cost. This is a kind of gift that the company gives to its investors. For example, if you own 100 shares of a company and the company announces bonus shares in the ratio of 1:1, your total number of shares will increase to 200. However, you don’t need to invest a single penny.

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What is the benefit of bonus share to the shareholders?

It is important for investors to remember that a company issues bonus shares when its cash reserves increase, but it prefers to invest the money in shares rather than paying out cash as dividends. Issuance of bonus shares is a sign of strong financial position of the company. However, it is important for investors to understand one thing: receiving bonus shares increases the number of shares you own, but does not immediately increase the value of your total investment. Because after issuing the bonus, the market price of the shares decreases by the same amount.

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Before investing it is worth noting that companies issue bonus shares as part of a strategic strategy. The main reason behind this is to increase liquidity. When a share price becomes too high, it becomes difficult for small retail investors to buy. Bonus shares lower the price, increasing the number of buyers. Bonus shares also show that the company is confident about its future. It benefits the company. Investors also grow.