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Guilherme Mazui

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What is the Difference Between Right Shares and Bonus Shares?

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The main difference between right shares and bonus shares lies in the way they are issued and the investment required from shareholders. Here are the key differences between the two:

  1. Issue Price: Right shares are issued at a discounted price, usually in proportion to the existing holdings of shareholders, while bonus shares are issued at no cost to the shareholders.
  2. Purpose: Right shares are issued to raise additional capital from the market, allowing existing shareholders to purchase new shares at a discount. In contrast, bonus shares are issued as a reward to the company's shareholders on a specific date, using free reserves created from genuine profits or securities premium collected in cash.
  3. Investment: Shareholders need to invest in right shares by purchasing them at the discounted price, while bonus shares are issued without requiring any investment from the shareholders.
  4. Shareholder Sentiment: Bonus issues can improve investor sentiment and highlight the company's success, as the total investment value remains unchanged. Right issues, on the other hand, involve shareholders investing in the company to raise capital.
  5. Payment: Bonus shares are always fully paid up, whereas right shares can be either partly paid up or fully paid up, depending on the proportion of paid-up value of equity shares when further issue takes place.

In summary, right shares involve an investment by the shareholders, as they need to purchase new shares at a discounted price, while bonus shares are issued freely to shareholders without requiring any investment.

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  • What is the Difference Between Right Shares and Bonus Shares?
  • Comparative Table: Right Shares vs Bonus Shares

    • Comparative Table: Right Shares vs Bonus Shares

    Here is a table comparing the differences between right shares and bonus shares:

    Feature Right Shares Bonus Shares
    Definition Right shares are shares issued to existing shareholders in proportion to their current holdings, usually at a discounted price, to raise capital. Bonus shares are shares issued to existing shareholders in addition to their current holdings, usually at no cost to the shareholders, to increase liquidity in the market.
    Purpose To raise additional capital for the company. To increase liquidity in the market and make shares more affordable for small investors.
    Investment Shareholders invest in right shares by paying a discounted price. No investment required from shareholders.
    Issue Price Discounted price for existing shareholders. No cost to shareholders.
    Dependence on Subscription Right shares depend on investors' subscription, and minimum subscription is mandatory. Bonus shares do not depend on investors' subscription, and no such mandatory requirement exists.
    Paid Up Value Right shares can be partly paid up or fully paid up, depending on the proportion of paid-up value of equity shares when further issue takes place. Bonus shares are always fully paid up.
    Dilution Existing shareholders are not diluted by a new issuance of shares to the general public. Existing shareholders are not diluted by new issuance of shares to the general public.
    Stock Splits No relation to stock splits. Often issued in the form of a stock split, where a certain number of bonus shares are issued for every existing share.

    In summary, right shares are issued to raise capital from existing shareholders, while bonus shares are issued to increase liquidity without requiring any investment from the shareholders. Key differences include the purpose of issuance, the issue price, and the dependence on investors' subscription.

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    Guilherme Mazui

    Guilherme Mazui is graduated in journalism from the Federal University of Minas Gerais (UFMG) and a master's degree in Communication from the University of São Paulo (USP). In addition, he has experience in advertising writing and has worked as a content editor in several companies.