# Ex-Bonus Share

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## Definition: Ex-Bonus Share

The share is called as “Ex-bonus” when the purchaser doesn’t get the right to receive the current bonus. The word ‘Ex’ means without.So, Ex-bonus shares exclude recently declared bonus.

Bonus shares are the free shares extended to the existing shareholders of a company. The shareholders don’t incur any additional cost. Bonus shares are issued in proportion to the number of shares the shareholders are holding currently.

Formula for calculating Ex-bonus share price:

If the company gives X: Y bonus where X is the number of Bonus shares and Y is the number of shares held by a person.

If P is the bonus price, then

Ex-Bonus Price = P*Y/(Y+X)

Example:

Company XYZ has a bonus issue of 1000 XYZ shares on the basis of 2 new shares for one existing share after a rights issue. Rights issue involves 1000 new shares of \$1 each in on basis of 1 new XYZ share for every 3 existing shares. Assuming share currently trading at \$1.5, calculate ex-bonus price.

The bonus issue is after the right issue. So, let’s calculate the ex-rights price first.
Current Market Price ,CMP=\$1.5
Rights ratio is 1:3
Assume one has 10 shares worth \$1.5 each = \$15
Now, ex-rights, one has 15 shares worth \$1.4 each = \$21 (because rights issue is given at \$1 and not \$1.5)

Coming to the bonus issue now:
Ratio is 2:1 i.e. 2 shares for every 1 held
One holds 15 shares now. So, he/she gets 30 bonus shares. Total is 45 shares.
The 45 shares are actually worth just \$21.

So, the ex-bonus price will be \$0.47

Hence, this concludes the definition of Ex-Bonus Share along with its overview.

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