Stock Market Basics FAQs

Define Bonus share & its record date.

The company will give bonus shares to existing shareholders. The bonus shares are issued according to the number of shares that an investor holds. If a company offers 1 to 5, it means that a share holder gets 1 share for every 5 shares. If an investor has 100 shares, they will get 120 shares.
The company will usually announce bonus shares with a record date. This is the date that is used to determine if the shares are eligible for bonus shares. Bonus shares are open to all investors who hold shares at the record date.
As a replacement for dividend payouts, companies often offer bonus shares.
After the bonus, the face value of the shares doesn't change. This is not like a stock split.
The market's number of shares is increased by bonus shares, which affects the Earning Per Share (companies net profit/number of shares) EPS. Since net profit remains the same, and shares are more common, shares EPS decreases after bonus shares are issued.
It is desirable that the share price should drop but this doesn't usually happen when bonus shares are offered. This often results in shareholder profit. This is due to increased liquidity and signal that the company promises to share its profits with investors.

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