Difference Wiki

Right Shares vs. Bonus Shares: What's the Difference?

Edited by Sumera Saeed || By Sawaira Riaz || Published on November 23, 2023
"Right Shares" are offered to existing shareholders at a discounted price, while "Bonus Shares" are given free based on existing holdings.

Key Differences

"Right Shares" are essentially an invitation extended to current shareholders to purchase additional new shares at a discount. This allows shareholders to buy more shares before they're offered to the general public. On the contrary, "Bonus Shares" don’t require any additional payment; they are free shares given to shareholders based on the number of shares they already own.
Sawaira Riaz
Nov 23, 2023
When a company needs to raise capital, "Right Shares" come into play, offering current shareholders the chance to maintain their proportionate ownership. This contrasts with "Bonus Shares", which are issued from the company's accumulated earnings and are essentially a conversion of retained earnings into stock, not really raising fresh capital.
Sawaira Riaz
Nov 23, 2023
The concept of "Right Shares" is about providing shareholders an opportunity — the "right" — to purchase new shares, typically at a discounted rate. "Bonus Shares", however, represent a bonus or reward to loyal shareholders, by providing additional shares without any additional cost.
Sawaira Riaz
Nov 23, 2023
From an accounting perspective, "Right Shares" can lead to fresh inflow of cash for the company, impacting both the liability and asset side of the balance sheet. In contrast, "Bonus Shares" only result in reshuffling of reserves and equity, with no actual cash inflow involved.
Janet White
Nov 23, 2023

Comparison Chart

Purpose

To raise fresh capital.
To reward shareholders, using accumulated profits.
Sawaira Riaz
Nov 23, 2023
ADVERTISEMENT

Cost to Shareholders

Requires payment, though typically at a discount.
Free of cost.
Sawaira Riaz
Nov 23, 2023

Source of Shares

Fresh issuance of shares.
Comes from accumulated earnings/reserves.
Sawaira Riaz
Nov 23, 2023

Effect on Share Capital

Increases both share capital and reserves.
Share capital increases, reserves decrease.
Sara Rehman
Nov 23, 2023

Dilution of Ownership

Can lead to dilution if existing shareholders don't subscribe.
No dilution as shares are issued proportionately to all.
Aimie Carlson
Nov 23, 2023

Right Shares and Bonus Shares Definitions

Right Shares

Shares available at a discount before public offering.
As a loyal shareholder, I was given the opportunity to buy Right Shares.
Sawaira Riaz
Oct 25, 2023
ADVERTISEMENT

Bonus Shares

Shares issued from accumulated company profits.
The corporation distributed its retained earnings in the form of Bonus Shares.
Sawaira Riaz
Oct 25, 2023

Right Shares

An option for shareholders to maintain ownership proportion.
Right Shares ensure that my stake in the company remains undiluted even after new issuances.
Sawaira Riaz
Oct 25, 2023

Bonus Shares

A reward for shareholder loyalty.
As a token of appreciation, the firm issued Bonus Shares to all its investors.
Sawaira Riaz
Oct 25, 2023

Right Shares

Additional shares offered to current shareholders.
The company decided to issue Right Shares to its existing shareholders at a discounted rate.
Sawaira Riaz
Oct 25, 2023

Bonus Shares

Free additional shares given to current shareholders.
I was pleasantly surprised to receive Bonus Shares from the profitable company.
Sawaira Riaz
Oct 25, 2023

Right Shares

Capital-raising tool for companies.
The firm raised significant capital through the issuance of Right Shares.
Janet White
Oct 25, 2023

Bonus Shares

Stock given without diluting overall stake.
Even after receiving Bonus Shares, my percentage ownership in the company remained the same.
Sawaira Riaz
Oct 25, 2023

Right Shares

Prioritized share buying option for existing stakeholders.
Being a long-term investor, the Right Shares offer was advantageous for me.
Janet White
Oct 25, 2023

Bonus Shares

Conversion of retained earnings into shares.
The company chose to transform its high retained earnings into Bonus Shares for its stakeholders.
Sawaira Riaz
Oct 25, 2023

FAQs

From where are "Bonus Shares" typically sourced?

"Bonus Shares" are typically sourced from the company's accumulated profits or reserves.
Sara Rehman
Nov 23, 2023

How do "Right Shares" affect a company's capital structure?

"Right Shares" increase the equity base of a company by bringing in fresh capital.
Sawaira Riaz
Nov 23, 2023

Are "Right Shares" always offered at a discount?

Typically, "Right Shares" are offered at a discount to entice existing shareholders, but it's not mandatory.
Aimie Carlson
Nov 23, 2023

What's the primary purpose of issuing "Right Shares"?

The primary purpose of "Right Shares" is to raise fresh capital for the company.
Sawaira Riaz
Nov 23, 2023

Do "Bonus Shares" cost anything to the shareholders?

No, "Bonus Shares" are issued free of cost to the shareholders.
Sawaira Riaz
Nov 23, 2023

Why do companies give out "Bonus Shares"?

"Bonus Shares" can be a way to reward shareholders without paying cash dividends, and they also capitalize reserves.
Janet White
Nov 23, 2023

How are "Bonus Shares" different from stock splits?

While both increase the number of shares, only "Bonus Shares" convert reserves into equity without altering share price significantly.
Harlon Moss
Nov 23, 2023

How long do shareholders have to exercise their "Right Shares" option?

The duration varies, but shareholders are given a specified timeframe to exercise their "Right Shares" option.
Aimie Carlson
Nov 23, 2023

Can a shareholder transfer their "Right Shares"?

Yes, shareholders can transfer their "Right Shares" entitlement to others.
Sawaira Riaz
Nov 23, 2023

How do "Right Shares" affect share price?

"Right Shares" typically cause a temporary drop in share price due to the discount.
Janet White
Nov 23, 2023

What happens if a shareholder doesn't exercise their "Right Shares"?

If not exercised, "Right Shares" can either lapse or the company might offer them to other interested parties.
Sawaira Riaz
Nov 23, 2023

Why might a company choose "Right Shares" over a public issue?

"Right Shares" can be quicker, less costly, and help existing shareholders maintain their ownership stake.
Sawaira Riaz
Nov 23, 2023

Can a company issue both "Right Shares" and "Bonus Shares" simultaneously?

While uncommon, a company can technically issue both "Right Shares" and "Bonus Shares" simultaneously.
Harlon Moss
Nov 23, 2023

Do "Right Shares" guarantee an increase in ownership percentage?

No, "Right Shares" allow shareholders to maintain their ownership, but don't guarantee an increase.
Sawaira Riaz
Nov 23, 2023

Why might a company prefer "Bonus Shares" over dividends?

"Bonus Shares" allow companies to reward shareholders without a cash outflow, and they can also improve market perception.
Sawaira Riaz
Nov 23, 2023

Do "Bonus Shares" dilute a shareholder's ownership?

No, "Bonus Shares" are issued proportionately, so relative ownership remains unchanged.
Sawaira Riaz
Nov 23, 2023

Is it mandatory for shareholders to accept "Bonus Shares"?

"Bonus Shares" are automatically credited, and shareholders don't need to accept or decline.
Sara Rehman
Nov 23, 2023

Can shareholders sell their "Right Shares" entitlement?

Yes, shareholders can sell their "Right Shares" entitlement if they don't wish to exercise them.
Janet White
Nov 23, 2023

Are "Bonus Shares" taxable for shareholders?

Tax implications vary by jurisdiction, but typically "Bonus Shares" aren't immediately taxable upon receipt.
Sara Rehman
Nov 23, 2023

Do "Bonus Shares" increase the company's total earnings?

No, "Bonus Shares" only reshuffle the equity structure, they don't increase total earnings.
Sara Rehman
Nov 23, 2023
About Author
Written by
Sawaira Riaz
Sawaira is a dedicated content editor at difference.wiki, where she meticulously refines articles to ensure clarity and accuracy. With a keen eye for detail, she upholds the site's commitment to delivering insightful and precise content.
Edited by
Sumera Saeed
Sumera is an experienced content writer and editor with a niche in comparative analysis. At Diffeence Wiki, she crafts clear and unbiased comparisons to guide readers in making informed decisions. With a dedication to thorough research and quality, Sumera's work stands out in the digital realm. Off the clock, she enjoys reading and exploring diverse cultures.

Trending Comparisons

Popular Comparisons

New Comparisons