March 24 (Lagos) - Africa Prudential Plc ( AFRIPRUD ), arguably the top registrar of Nigeria,  just closed its register for the purpose of issuing bonus shares as per their corporate action announced earlier this year. The Company is giving a bonus of 1-1 to its shareholders of record as of March 21 2024. 

This morning, shareholders woke up to see their stock price been adjusted lower by 50% to account for that 1-1 bonus issue. So where exactly is the bonus here? Was that a stock split or a bonus issue? Let us take a look at the difference between a stock split and a bonus issue.

The bonus is in the face value of the stock. Face value of these shares is 50 kobo so you received a bonus stock which has a face value of 50 kobo per unit. That is the bonus. 

So what’s the difference between a stock split and a bonus issue? That is the topic of the day, and this is very important for investor education to understand the difference between the two. 

1) Bonus issue - as the name suggests, company creates new shares and issues to existing shareholders. If a company is giving 1-1 bonus issue, it means it is doubling its shares outstanding. Its stock price reduces proportionately to account for the bonus issue. The face value of the stock does NOT reduce. That is where the bonus is really and not in the market price and many may believe. 

2) Stock split - A stock split is exactly what happens when a stock price is reduced proportionately to account for increase in issues shares. In a stock split, a company divides its shares to create new shares. Therefore, the face value of the shares gets cut proportionately to the split. For example, a company announces a 1:1 stock split and issues additional shares to its shareholders. The value of the Company remains the same here as the price is adjusted lower proportionately to the stock split. The difference is that the face value of the stock gets cut as well. That is a stock split. Some notable Companies that have done stock splits in recent times in USA are Tesla, Palo Alto Networks among others. 

So what AFRIPRUD did was a bonus issue and not a stock split. Congrats to the shareholders of Africa Prudential Plc, that is a good one from the Company. If the stock manages to climb back to its recent high's they are really going to enjoy that bonus.