What Is a Bonus Issue?
A bonus issue is a type of corporate action in which a company issues new shares to its existing shareholders without asking them to pay for those shares. The shares come from the company's own reserves — not from raising new external money. Understanding what a bonus issue does (and does not do) to the value of your holding is important for any Nigerian investor.
Bonus Issue. A bonus issue (also called a scrip issue or capitalisation issue) is when a listed company distributes additional shares to its existing registered shareholders free of charge, in proportion to their current holdings, by converting balance sheet reserves into issued share capital.
How a bonus issue is calculated
A bonus issue is expressed as a ratio — for example, "1-for-4" means you receive 1 new share for every 4 shares you hold. If you hold 2,000 shares and the company announces a 1-for-4 bonus issue, you receive 500 bonus shares, bringing your total to 2,500. No payment is required.
What happens to the share price after a bonus issue
After a bonus issue, the share price adjusts downward on a theoretical basis to reflect the increased number of shares outstanding. This is called the theoretical ex-bonus price (TEBP). For a 1-for-4 bonus, the TEBP is approximately 80% of the pre-bonus price (since 4 shares become 5, each share is now worth 4/5 of the original price). The total value of your holding remains approximately the same immediately after the bonus — you have more shares at a lower price per share.
Bonus issue vs cash dividend
A cash dividend transfers money from the company to you — your bank balance increases and the company's cash reserves decrease. A bonus issue transfers no money — you receive more shares, but the price per share adjusts. Over time, if the company grows, the additional shares from a bonus issue may appreciate in value, but the bonus issue itself is not a cash distribution.
How bonus shares are credited to your CSCS account
Bonus shares are allocated automatically to eligible registered shareholders as at the qualifying date. The company's registrar processes the allocation and credits the new shares to each shareholder's CSCS account. No action is required from you — the shares appear in your CSCS holding automatically after the allotment date.
Why companies issue bonus shares
Companies issue bonus shares for several reasons: to reward existing shareholders without distributing cash; to bring the share price to a more accessible level; to convert retained earnings or revaluation reserves into permanent share capital; and sometimes to signal confidence in the business. A bonus issue does not inject new money into the company.
Questions
About bonus issue
This page is for general information and educational purposes only. It does not constitute financial advice, investment advice, legal advice, or tax advice. The value of investments can fall as well as rise. Seek independent regulated financial advice before making any investment decision. Shares Saver does not provide financial advice.
Own shares in your name
Start from ₦10,000 a month. Pause whenever you like.