Bonus issue (or scrip issue or stock split or capitalization issue)

May 1, 2019 by  
Filed under Nigeria Stock Exchange

A corporate action in which a company’s existing shares are divided into multiple shares. The issue of shares to shareholders is in proportion to their existing holdings. A company may decide to distribute such shares as an alternative to increasing the dividend payout. Although the number of shares outstanding increases by a specific multiple, the total naira value of the shares remains the same. In this process, fractions of shares may arise; they are often aggregated and sold, after which a cash payment, in respect of the fraction sold, is made to the appropriate shareholder.

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