A bonus issue gives you more shares without asking for new cash. The company moves amounts from reserves into share capital on the books. Your proportional ownership usually stays the same; the share price tends to adjust downward for the larger count, similar in spirit to a split though the accounting differs.
Key takeaways
- You do not pay subscription money for bonus shares.
- Total market value of your holding should be roughly unchanged on the day, all else equal.
- Bonus issues can improve liquidity by increasing the number of shares in circulation.
- Tax treatment of bonus shares varies by jurisdiction; check before you assume they are event free.
Why it matters in Ethiopia
As more companies list and communicate with public shareholders, bonus announcements will appear in market news. Read the ratio (for example one for every four held) and the record date so you know who qualifies.