New share issue, bonus issue and share split

A limited company can get more money from shareholders by issuing new shares in a rights issue. In a rights issue a company sells new shares that new or existing shareholders may subscribe for.

A new share issue increases a company's share capital by the nominal value per share (par value ) and the number of shares subscribed in the rights issue. The excess are allocated to a a premium fund.

Companies can also make a bonus issue to consolidate the business and increase the share capital. A bonus issue does not give any new capital to the company. A bonus issue means that capital are moved to share capital from other shareholders' equity. In a bonus issue, the number of shares increases and existing shareholders get new shares.

Companies can also do a split of their shares. It can be a regular split or a reverse stock split. Shares are traded in trading posts. A trading post can be 200 pieces of shares. When the stock price has increased a lot in value, it can be very expensive to buy a trading post. A company can do a split to make it easier to buy a trading post.

When a company makes a split it gives out more shares, a share split of 2:1 means that shareholders get 2 new shares for one old share. When you get more shares, the value per share decreases and the share price in this case with a split ratio of 2:1 would mean a halvation of the share price. A reverse split is the opposite to a ordinary share split, the number of shares decreases, which increases the value per share and the stock price.

In share issues, the ratio of new shares and old shares are stated by first typing the number of new shares, a colon, and then the number of old shares. A new share issue of 2:1 indicates that a shareholder is entitled to subscribe for two new shares for one old. A bonus issue of 2:1 indicates that a shareholder is entitled to subscribe for two new shares for one old. A split of 2:1 indicates that an investor gets 2 new shares in exchange for each old share.
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new share issue, bonus issue and share split, trading post