InvestorQ : How do rights issue differ from stock splits and bonus issues made by companies?
Bhavik Nehru made post

How do rights issue differ from stock splits and bonus issues made by companies?

Answer
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sara Kunju answered.
1 year ago


The basic difference is that rights are an option and bonus and splits are not options. They are a mandatory issue of additional shares based on the resolution at the AGM. Many investors tend to confuse rights with bonus issues and splits. There are some basic differences here. Both bonus and splits are value neutral but rights are not value neutral because the investor benefits to the extent the rights are at a discount to the market price. Secondly, neither bonus issues nor stock splits are EPS dilutive while rights are necessarily EPS dilutive. That is because in a rights issue, there is fresh flow of funds into the company and new shares being issued. Over the last many years, rights have been a popular means of financing for Indian companies.