- What are bonus shares and who are they awarded to?
- How is the price of bonus shares calculated?
- When can we sell bonus shares?
- When are bonus shares added to the portfolio?
What are bonus shares?
Bonus shares are shares that you do not need to pay money to receive in the stock market, and are given to current stockholders of a company for free. These shares, which are not subject to tax, are the result of capital increase of companies and are very popular among stock market shareholders. In order to fully familiarize yourself with this topic and other relevant concepts, we suggest you to participate in the Academy’s fundamental analysis course.
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Bonus shares are awarded free of charge and without payment of any amount only to the shareholders of a company. It means that you do not pay money for bonus shares to be added to your stock portfolio in the stock market, and this share is added to your trading portfolio by the company of which you are a current shareholder.
As in the article “What is capital increase?” We mentioned that the bonus shares are the shares that the company allocates to its current shareholders after the approval of the capital increase from the accumulated profit and the capital increase from the revaluation of assets in the Extraordinary General Assembly. Since the shareholders are entitled to receive new shares without paying any amount, it is called “bonus shares”.
How is the price of bonus shares calculated?
After the capital increase from the accumulated profit and also, the capital increase from the revaluation of the assets where the bonus shares are awarded to the shareholders, the price of each share is adjusted according to the number of bonus shares in such a way that the value of the shareholders’ assets remains constant. Accordingly, the theoretical price of each share after the capital increase and reopening of the symbol, as well as the number of shares of each shareholder can be calculated according to the following formulas.
For example, imagine that the closing price of a company’s shares before the capital increase is 1000 Tomans. The company decides to increase its capital by 100%. In this case, the number of shares of its shareholders will double and the theoretical price of each share will be 500 Tomans on the opening day. It should be noted that after the reopening of the share, the supply and demand process will lead to the difference between the actual price and the theoretical price of that share.
How to get information about capital increase?
To find out about the capital increase of your portfolio symbols, just visit the Rahvard website and type the name of the desired symbol in the search box at the top of the page and search. In this case, you will be directed to the relevant symbol page and you can see all the announcements related to the increase of that company by clicking on the reports tab and selecting the “Notification” option from the opened menu.
Also, if you want to be informed about the status of all companies that have increased their capital, you can click on the “Kedal Notification” tab from the top bar of the page after entering the Rahvard site. In this case, you can see the relevant ad with the title of capital increase.
In which type of capital increase are bonus shares awarded to us?
As we mentioned in the previous articles, the types of capital increase methods are: capital increase from the place of accumulated profit, capital increase from the place of cash collection and collection of claims, capital increase from the place of revaluation of assets and capital increase from the place of spending shares. Among these methods, joint-stock companies will be able to pay bonus shares to their shareholders when they increase their capital from the accumulated profit or increase their capital from the revaluation of their assets.
When will bonus shares be added to shareholders’ portfolios?
When the capital increase of a company is registered in the company registration authority, bonus shares will also be added to the shareholders’ portfolio. Usually, 2 months after the registration of the capital increase announcement, bonus shares will be added to the shareholders’ portfolio and it will be possible to trade them. Otherwise, the duration of adding bonus shares to the portfolio depends on the amount of capital increase, and in this case, we are faced with two situations as follows:
If the amount of capital increase is less than 200%
When the amount of capital increase of the company is less than 200%, maximum 2 working days after the disclosure of the decisions of the assembly, the symbol of the share will be reopened and its transactions will be done.
If the amount of capital increase is more than 200%
When the increase of the company’s capital is more than 200%, between 2 to 4 months after the disclosure of the decisions of the assembly, the share symbol will be reopened and its transactions will be possible.
The thing that the shareholders should consider is that the trading symbol of the company will be stopped 2 working days before the holding of the extraordinary general meeting of capital increase. After publishing the report in the Kodal system, the relevant symbol will be tradable on the stock exchange again.
When can we sell bonus shares?
You can sell your bonus shares once they have been added to your account. As it was said, after applying the capital increase and recording its report on the Kodal system, it will be possible to sell bonus shares like other shares. It generally takes between 2-4 months for bonus shares to be added to all shareholders’ portfolios, and then, 2-3 weeks later, the bonus shares are available for sale.
Why do companies give bonus shares?
Bonus shares are very popular among shareholders; Because shareholders will own more shares without paying additional amount. Therefore, stock companies with a license to operate in the stock market are also aware of this issue, instead of distributing cash profits among their shareholders, they proceed to pay profits through the distribution of bonus shares.
Therefore, companies at some point benefit from the distribution of bonus shares among their current shareholders and can attract more investors in this way. In fact, the allocation of bonus shares to the shareholders of a company increases the capital of that company but does not increase its net worth.
To whom are the bonus shares awarded?
Bonus shares are awarded only to those shareholders who are shareholders of the company on the date of holding the extraordinary general meeting to approve the capital increase. Therefore, it is recommended to capital market participants that if you want to sell any of your shares, keep at least one of those shares in your portfolio so that you can be considered a shareholder at the time of holding the extraordinary general assembly related to the capital increase of that company. And you can benefit from bonus shares.
How to convert bonus shares to ordinary shares?
Unlike the pre-emptive shares, which after the capital increase, the shareholders have to decide and take action to sell or deposit the money in order to convert it into ordinary shares, the conversion of bonus shares into ordinary shares does not require any special action.
The symbol of the bonus shares is not different from the symbol of the main shares, and if you were a shareholder of the company before the suspension of the shares to increase the capital, you will be eligible to receive the bonus shares, and these shares will be added to your portfolio without the need to take any action or pay any amount.
Bonus shares are shares that stock companies active in the stock exchange will be able to pay to their shareholders after increasing capital from accumulated profits and increasing capital from revaluation of their assets. The bonus stock symbol is not different from the original stock symbol, and without the need for any action, these shares will be added to the shareholders’ portfolio. When a company pays out bonus shares to its shareholders, it actually increases the capital of the company without increasing its net worth. To learn more about these concepts, we suggest you read the fundamental analysis training article.