Difference between Right and bonus share

Difference between Right and bonus share

1. Issue

Right shares are issued to existing shareholder as proportion to shares held by them. When bonus share are issued as dividend to the shareholder.

2. Resource Generation

Right share are issued to generate funds for operation. Where the bonus share did not generate any further fund. Bonus issue just divided the existing share capital.

3. Existing number of share

Right and bonus both increase the total number of share.

4. Share price

Right share does not impact the share price because the right share normally issue at price lower than market price. Bonus share also impact the share price because now more shares will share the dividend in future and this will decrease the share price.

5. Earnings per share

Right and bonus share both reduce the earning per share due to number of share increase in both cases. However in case of right share chance of reducing earning is less than bonus share because right share is supported by resources which may be used to earn additional profit.