Right Shares vs. Bonus Shares: Know the Difference

By Shumaila Saeed || Published on January 19, 2024

Right Shares are offered to existing shareholders at a discount, whereas Bonus Shares are additional free shares given to existing shareholders.

Right Shares vs. Bonus Shares

Key Differences

Right Shares are issued by companies to their existing shareholders, offering them the opportunity to buy additional shares at a discounted price. On the contrary, Bonus Shares are issued without any cost, as a reward to the existing shareholders, utilizing the company's accumulated profits.

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While Right Shares require shareholders to pay an additional amount to acquire more shares, Bonus Shares are allocated based on the number of shares already owned without any extra payment. This distinction highlights the financial commitment needed for Right Shares, unlike Bonus Shares.

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The issuance of Right Shares is often a strategy to raise additional capital for the company. In contrast, Bonus Shares are distributed when a company wishes to reinvest its profits into the business while rewarding its shareholders.

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Right Shares give a privilege to existing shareholders to buy shares before the public, maintaining their ownership percentage. Bonus Shares, however, are more about distributing additional shares, reflecting the company's growth and profitability.

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In the case of Right Shares, shareholders can choose to buy or ignore the offer. With Bonus Shares, the additional shares are automatically added to the shareholders' portfolios, signifying a direct increase in their holdings.

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Comparison Chart

Cost to Shareholders

Shareholders pay at a discounted price

No additional cost to shareholders

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Purpose

To raise additional capital

To reinvest profits and reward shareholders

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Shareholder Action

Optional purchase

Automatically allocated

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Source of Shares

New share issuance

Company's accumulated profits

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Impact on Ownership

Maintains or increases ownership share

Increases ownership share without dilution

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Right Shares and Bonus Shares Definitions

Right Shares

Shares offered to existing shareholders at a discounted price.

The company offered right shares to finance its expansion.

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Bonus Shares

Additional shares given free of cost to existing shareholders.

The bonus shares increased her holdings in the company.

Jan 08, 2024

Right Shares

Privileged offer to current shareholders before public issuance.

The right shares were issued before the new public offering.

Jan 08, 2024

Bonus Shares

Reflects company’s profitability and desire to reinvest profits.

The profitable year resulted in the distribution of bonus shares.

Jan 08, 2024

Right Shares

A method for companies to raise additional funds.

Right shares were issued to gather capital for new projects.

Jan 08, 2024

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Bonus Shares

Reward to shareholders using the company's accumulated profits.

Bonus shares were distributed from the company's retained earnings.

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Right Shares

An opportunity for shareholders to maintain their ownership stake.

He bought right shares to keep his percentage in the company.

Jan 08, 2024

Bonus Shares

Increase in share capital without additional investment from shareholders.

The issuance of bonus shares expanded the company's share capital.

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Right Shares

Shareholders’ right to purchase additional shares.

As an investor, she exercised her rights to buy right shares.

Jan 08, 2024

Bonus Shares

Automatic allocation of extra shares to current shareholders.

His portfolio grew automatically with the new bonus shares.

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Repeatedly Asked Queries

Why are Bonus Shares issued?

To reinvest profits and reward shareholders.

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Do Right Shares require payment?

Yes, at a discounted price.

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Why do companies issue Right Shares?

To raise additional capital.

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Do shareholders pay for Bonus Shares?

No, they are issued free of cost.

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What are Bonus Shares?

Free additional shares given to shareholders from profits.

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How do Bonus Shares affect share capital?

It increases without new funds.

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Are Right Shares common in startups?

Less common, as they require capital infusion.

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Can shareholders decline Right Shares?

Yes, they can choose not to purchase.

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What is the impact of Right Shares on share capital?

It increases with the new share issuance.

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What are Right Shares?

Additional shares offered to existing shareholders at a discount.

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Are Bonus Shares optional for shareholders?

No, they are automatically allocated.

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Do Bonus Shares dilute ownership?

No, they increase shareholding proportionately.

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Do Right Shares dilute ownership?

Not if existing shareholders purchase them.

Jan 19, 2024

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About Author

Written by

Shumaila Saeed, an expert content creator with 6 years of experience, specializes in distilling complex topics into easily digestible comparisons, shining a light on the nuances that both inform and educate readers with clarity and accuracy.

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