A bonus share, or bonus issue, is when a company distributes extra shares to its existing shareholders.
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Who gets it: Shareholders who own shares in a company at the end of trading on the day before the ex-date.
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Ex-date impact: On the ex-date, the stock price usually drops. This can make it look like you’ve lost money before the market opens.
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Bonus share: The value of the price drop is essentially converted into bonus shares, which are then added to your account.
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Distribution date: Bonus shares are credited to your account on this date and function just like regular shares.
In simple terms, a bonus share means that a shareholder’s position changes from holding only regular shares (which have dropped in price) to holding regular shares (at the reduced price) plus additional bonus shares (which represent the value lost due to the price drop).
