What happens to my position if a company actions a bonus issue or stock dividend?

When a company allocates bonus issue of shares or a stock dividend, this means that shareholders of the company will receive fully paid shares free of charge. The amount of new shares shareholder would receive is based on the terms of the issue, which is expressed in ratio – for example 1 bonus shares per 10 shares held (1:10).

Bonus issue may increase the number of shares you are holding but the price of the shares would fall proportionally to the ratio, having no overall affect on the monetary value of your holdings.

Example:

Say Apple announces a 1 for 10 bonus issue or stock dividend, and you are holding 100 shares. If you hold this position through the ex-date, you would receive a new position of 10 new shares at a level of 0 in Apple and you would continue holding your initial position of 100 shares. Equally, the share price would also drop by 1/10 or 10%.

Please note that you do not have to take any action for mandatory corporate event and we will assist to book these positions for you accordingly.

How do bonus issue/stock dividends affect my CFD account?

If you have an open position on a company that offers a bonus issue or stock dividend, then we’ll open a new separate position on your account at the level of zero, using the terms of the offer to calculate its new size on the ex-date. Your original position will be unaffected.

If you have a non-guaranteed stop on your original position, it will remain unaffected. If you have a guaranteed stop on your position, then we’ll close the original position at its opening level and open a new position that reflects the terms of the offer. Any stops or limits attached will also be amended accordingly, so that your monetary risk remains the same.

What if I have a short position?

If you have a short position, the bonus issue shares would be opened as a new short position at a level of zero increasing the number of shares you hold short in accordance with the bonus issue terms and your monetary risk remains the same.

How do bonus issue/stock dividends affects my share trading account?

If you have an open position on a company that offers a bonus issue or stock dividend, then we’ll open a new separate position on your account at the level of zero, using the terms of the offer to calculate its new size. Your original position will be unaffected.

Please note that there can be a delay in the allocation of the bonus issue/stock dividend and the shares may not be credited on the pay date. It may take several days after the pay date for us to receive the shares. Once we have received the shares, these shares will be allocated to the accounts accordingly.

Please note: This information is intended as a generic example, and subject to change at any point. It may not apply in every scenario.