bhavana said:
What is difference between bonus share and stocks split?
Does face value in both case changes?
Locally we call them bonus, internationally it is called a stock split. They both mean the same.
A stock split (bonus) simply involves a company altering the number of its shares outstanding and proportionally adjusting the share price to compensate. This in NO WAY affects the intrinsic value or past performance of your investment, if you happen to own shares that are splitting.
A typical example is a 2-for-1 stock split. A company will announce that it's splitting its stock 2-for-1 in one month. One month from that date, the company's shares (having traded the day before at, say, Rs.30) will now be trading at half the price from the previous day (so they'll open at Rs.15). The company, which had 10 million shares outstanding, now consequently has 20 million shares outstanding. The price has been halved in order to accomodate a doubling of the share total.
Why would a company do a stock split (bonus)?
A few reasons. First, as a stock price skyrockets, some people will be psychologically unwilling to pay that "high price" so a stock split brings the shares down to a more "attractive" level. Again, the intrinsic value has NOT changed, but the psychological effects may help the stock.
Second, a stock split generally occurs in the face of new highs for the stock. Thus, it's an event dripping with positive connotations and associations. . . it's makes bulls snort and roar to suddenly have "twice as many shares" as they started with, for example.
Third, and final, with lower-priced shares, a stock's LIQUIDITY increases, often reducing the BID/ASK SPREAD and making it easier to trade. This is always good.