The price is adjusted so what benefit is it to the shareholder? Why do companies issue it as a benefit? It doesn’t cost the company anything to issue bonus shares. And what determines the bonus share capacity of a company?

More at: r/NepalStock by depressedcompiler

4 comments
  1. probably someone influential in the past bullshitted about bonus shares and now all Nepali investors think bonus share good and executives at companies are exploiting the misunderstanding Nepali investors have and profiting on our expenses

  2. Bonus shares are issued to increase paid up capital of the company and NRB highly encourages BFIs to distribute bonus shares instead of cash dividends …bonus shares are based on profits earned so it does not mean it does not costs the company anything to issue bonus shares…

    The benefit of bonus shares is usually in the long term after compouding you can accumulate a lot of shares… short term ma khasai profit hunna unless bull run ma when the price is expected to rise even after adjustments….40 kitta of IPO of NICA is almost equal to around 500 kittas now…so your investment grows over time due to increase in quantity of shares instead of increase in the price of the shares….however this is only true if the company keeps making healthy profits and growth over time..

    The opponents of bonus shares will say bonus shares keeps the price of shares getting too high in the long run due to often price adjustment but as a shareholder we have no choice….company le j dincha tyai line ho…Nepali market ma everyone is used to bonus shares as that is the most common type of dividend provided so people get excited to recieve them.

    Edit: One benefit of bonus shares is it increases the number of shares of a company which makes it harder for big investors to contol and manipulate the price of a stock…this is the reason why you dont see very high price fluctuations of commercial banks unlike hydros and finances

  3. 1. There is no actual benefit to shareholder in terms of value addition.
    2. Generally company issue it so that they increase the paid up capital and do more business with it. There are also regulatory provision which prohibits bfis from distributing cash dividends. The misconception is company can do growth only if bonus share is issued, in reality even without issuing bonus share company can use the money from retained earning to purchase inventory,equiment and other investment. And even with distribution of bonus share there is no certainty that company will do better next year.
    3. Its not like company can issue any no of bonus share. Bonus share is nothing but moving money from one account to another account in expense of tax(5%). So if company distributes 10% bonus they should make profit equivalent to 10% of their current paid up capital. Eg: nabil ko 16 arba jati cha hola aba usle 33% jun 5 arba paisa cha usanga bhane matrai dina paucha. ra kati dine kati nadine board ko member haru le decide garchan
    4. generally distributable profit/no of share garyo bhane dividend capacity aaucha aba bonus dine ki cash dine tyo regulatory ko rule ra board member ko discussion bata thaha huncha

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