An "issue" is a specific event or problem that a company is facing. This can be anything from a new product launch to a financial scandal. When a company is facing an issue, it is important to understand how this will impact the company's stock price. If the issue is positive, it may lead to an increase in the stock price. However, if the issue is negative, it could lead to a decrease in the stock price. What is the benefit of bonus shares to shareholders? There are several benefits of bonus shares to shareholders. One benefit is that it increases the number of shares that the shareholder owns in the company, which can lead to a higher return on investment if the company's stock price increases. Another benefit is that it can provide a shareholder with additional voting power within the company. Finally, bonus shares can also be used to offset any future dilution that may occur if the company issues new shares.

What is the purpose of a bonus issue? A bonus issue is a free distribution of shares to existing shareholders. The purpose of a bonus issue is to increase the number of shares outstanding without diluting the ownership stake of each shareholder. This can be done to raise capital, or to distribute surplus cash to shareholders. Bonus issues are often used by companies that have a large amount of cash on their balance sheet and want to return some of that cash to shareholders. What are the sources of bonus issue? A bonus issue, also known as a scrip dividend, is a dividend payout option whereby companies distribute new shares to existing shareholders instead of cash.

The main reasons companies would opt to do this are:

1. To conserve cash: By issuing new shares instead of cash, companies can save on cash outflows. This is especially useful for companies that are cash-strapped or are in need of funds for expansion.

2. To increase liquidity: Bonus issues can help to boost liquidity as more shares are created, leading to a higher trading volume. This can be beneficial for companies that are looking to list on a stock exchange.

3. To reward shareholders: Bonus issues can be seen as a way of rewarding shareholders for their loyalty and support.

4. To raise capital: By issuing new shares, companies can raise additional capital for expansion or other purposes.

5. To reduce the share price: By issuing new shares, the company can effectively reduce the share price, making it more affordable for investors to buy into the company. This can be beneficial for companies that are looking to generate more interest from potential investors.

Why do share prices drop after bonus?

There are a few reasons why a company's share price might drop after it announces a bonus. The most likely reason is that the market was expecting a bigger bonus than the company actually delivered. This can cause disappointment among investors, leading them to sell the stock.

Another possibility is that the company is using the bonus to mask some underlying problems. For example, if a company is struggling to generate profits, it might give out a one-time bonus to make its financials look better than they actually are. This can lead to suspicion among investors, who might sell the stock.

Finally, it's also possible that the market is simply reacting to the news of the bonus and not necessarily to the size of the bonus itself. If there are concerns about the company's overall financial health, the announcement of a bonus could trigger a sell-off.

What is right issue and bonus issue?

A right issue is an invitation to existing shareholders to subscribe for new shares in the company in proportion to their existing holdings.

A bonus issue is a free issue of shares to shareholders in proportion to the shares they already hold.