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Bonus Shares from Breadtalk

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foodrepublic I have received a letter from CDP saying that bonus shares from Breadtalk has been credited to my account. It is a ratio of 1 bonus share for every 5 shares you have.

For those who don’t know, bonus shares are given when a company does well and want to reward its investors. Instead of giving out dividends, it gives out bonuses and gets to keep more of its profits within the company for expansion plans. Some companies offer a mix of bonus shares and dividends, or gives you the option of dividends or more shares like what OCBC did for last year.

For investors, as long as the expansion plans of the company meets or exceeds expectations, its share prices will rise.

So technically, the value of Breadtalk holdings have gone up by 20% within one day.

But I would expect that its shares will be going down a bit after it has been issued to all shareholders, as some of the shareholders will normally sell the bonus issue to get some funds.

The issuance of bonus shares is yet another reason why buying stocks is one of the best investment one can make.

Aside from “free lunch” while eating at Food Republic, Din Tai Fung or the bread sold at Breadtalk :) As they all belong to the Breadtalk group.

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2 comments:
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Musicwhiz said...
April 8, 2010 at 11:29 PM  

Hi Lemizeraq,

I have a different view, sorry. Bonus shares are simply a share split. There's no additional value whatsoever to the shareholder. Market price adjusts to accommodate a larger number of shares.

Boustead did a share split before and at least they did not term it a "bonus". Haha.

Cheers,
Musicwhiz

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Lemizeraq said...
April 11, 2010 at 9:27 PM  

Hi Musicwhiz,

Thanks for visiting. Yeah, I've looked around and quite a few sites and sources equates bonus issue with splits.

What I don't understand is if this is the case, why didn't the Breadtalk shares fall by the equivalent? I bought Berkshire Hathaway B shares after their split and it did fall by the equivalent.

In that case, I would rather have the OCBC way which is to ask investors what they want, dividends or crediting you with the shares equivalent instead of cash dividends.

Thanks for this comment! I've learnt something from cross checking around.

Lemizeraq

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