Let's understand Bonus shares in detail.
What are Bonus shares?
- Bonus shares are additional shares given for free to the current shareholders of a stock.
- Bonus shares are issued in a pre-decided ratio and are allotted as per the number of shares held by the shareholders.
Example 1: If a company announces bonus shares in the ratio 1:2, this means that every shareholder will get one free share for every 2 shares held.
So, if a user has 10 shares of a company and is eligible for receiving Bonus shares then as per the 1:2 ratio the shareholder will get 5 free shares in their Demat account.
Example 2: If a company announces bonus shares in the ratio of 2:1, it means for every 1 share held by the company the shareholder will receive 2 shares.