Definition of 'Bonus Issue'
Bonus issues are often used by companies to reward shareholders for their loyalty and to boost the company's stock price. However, they can also be used to dilute the value of existing shares, which can be a concern for investors.
There are two main types of bonus issues:
* **Stock split:** A stock split is a type of bonus issue in which the number of shares outstanding is increased, but the par value of each share is decreased. This has the effect of reducing the price of each share, making it more affordable for investors to buy.
* **Reverse stock split:** A reverse stock split is the opposite of a stock split. In a reverse stock split, the number of shares outstanding is decreased, but the par value of each share is increased. This has the effect of increasing the price of each share, making it less affordable for investors to buy.
Bonus issues can be a complex topic, so it is important to consult with a financial advisor before making any decisions about whether or not to participate in a bonus issue.
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