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

A bonus issue or stock dividend is when shareholders are given ‘free’ shares. The amount of new shares the shareholder would receive is based on the terms of the bonus issue, which is expressed as a ratio – for example, 1 bonus share per 10 shares held. Bonus issues may increase the number of shares you hold but the price of the shares would fall proportionally to the ratio, having no overall affect on the monetary value of your holdings.

If you have an open position on a company that offers a bonus issue or stock dividend, we’ll open a new separate position at the level of zero on the ex-bonus issue date. Your original position will be unaffected.

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%.

Note for spread bet and CFD accounts:

If you hold 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. The total monetary value of your position would not be affected.

If you have a guaranteed stop attached to a spread bet or CFD position then the level, size and stop will be amended accordingly using the ratio of the bonus on your underlying position.