Bonus stock refers to additional shares issued by a corporation to its existing shareholders without any payment required. This practice is often used as an incentive to encourage investment in the company's bonds or other stock offerings. Bonus stocks are also known as bonus shares and are classified as a form of watered stock, which means they may dilute the value of existing shares.
Bonus stocks are relevant in corporate finance and securities law. They are typically issued during corporate actions such as stock splits or as a reward for shareholders. Understanding bonus stocks is important for investors and companies alike, as they can impact shareholder equity and the overall valuation of a company. Users can manage related forms, such as stock purchase agreements, using templates from US Legal Forms.
Here are a couple of examples of abatement:
For instance, a corporation may decide to issue one bonus share for every ten shares held by existing shareholders. This action can encourage more investment in the company's bonds, as shareholders see increased value in their holdings. (hypothetical example)
| Term | Definition | Key Difference |
|---|---|---|
| Bonus Stock | Additional shares issued to existing shareholders without payment. | Issued as an incentive to encourage investment. |
| Stock Split | Division of existing shares into multiple new shares. | Increases the number of shares but does not change overall value. |
| Dividend | Distribution of a portion of a company's earnings to shareholders. | Paid in cash or additional shares, not necessarily tied to stock issuance. |
If you are a shareholder and receive bonus stocks, review your investment strategy to understand how this affects your holdings. You may want to explore US Legal Forms for templates related to stock transactions or consult with a financial advisor for personalized guidance.
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Bonus stocks are extra shares given to shareholders without any payment required.