Rights issues vs bonus shares: what changes for shareholders?

Begin with 100 shares out of 1,000

The fictional company has 1,000 ordinary shares, the general ownership shares used throughout this example. Each is priced at ₩10,000, giving a combined share-market value of ₩10,000,000. This total is called market capitalization. You own 100 shares, or 10%. The paid issue and bonus issue below are separate outcomes from that same starting point, not successive transactions.

In a paid share issue, investors give the company money or assets and receive newly created shares. Our calculation uses cash; giving assets instead is called a contribution in kind and is outside these numbers. A rights issue gives existing owners the opportunity to subscribe—to apply and pay for the new shares under the offer’s conditions. A paid issue can instead allocate shares to outside investors. The Korean category of paid capital increases covers both routes and is broader than the English term rights issue.

For the bonus issue discussed here, shareholders pay no new subscription money. The company moves an amount already recorded in its equity accounts from eligible reserves to stated capital. These are two parts of the accounting total left for owners after what the company owes is subtracted from what it owns. Stated capital is a formal share-capital amount, and only reserves that may legally be moved can be used. The company then gives owners shares in proportion to their holdings. Moving entries within the accounts does not itself bring in cash or make the business worth more.

Start with the paid issue. The new shares are offered at ₩6,000, below the existing ₩10,000 price. The company will have more money, but that value will also be shared across a larger number of shares. Both changes belong in the calculation; the offer price alone is not a prediction of the later market price.

For the paid issue, all 500 new shares are subscribed at ₩6,000. Cash of ₩3,000,000 enters the company. We assume that each won received adds one won to the model’s total market value of all shares, with no other change in business value. The resulting price is arithmetic, not a price forecast or an exchange's official ex-rights calculation.

On narrow screens, scroll the tables sideways.

The paid issue gives (1,000 × 10,000 + 500 × 6,000) ÷ 1,500 = ₩8,666.666…. Keep the unrounded result for later calculations. A company can have more cash and a larger total market value while the value per share is lower, because that value is now divided among more shares.

Keeping a 10% stake requires another ₩300,000

One new share is offered for every two old shares. Your 100 old shares therefore let you apply for 50 new ones. You must pay 50 × ₩6,000 = ₩300,000 to take them all. Afterwards you own 150 out of 1,500 shares. Both your count and the company’s count have grown in the same proportion, leaving your ownership at 10%.

At the model price, those shares are worth ₩1,300,000. The extra ₩300,000 did not appear as a gain: you paid it in. Including that cash, you had shares worth ₩1,000,000 plus ₩300,000 before subscribing, and shares worth ₩1,300,000 afterwards.

In every outcome below, the whole issue still completes: other investors take any shares you do not subscribe for.

“Let lapse” means allowing your opportunity to expire without applying or selling it. “Sell rights” is a separate case: assume someone else may buy the complete opportunity attached to your 100 old shares, and pays its theoretical value. That opportunity is the entitlement named in the table. These are invented transaction conditions. Whether an actual offer lets you transfer it is a question for its terms.

The opportunity has value in this model because it lets someone buy 50 shares worth ₩8,666.666… each while paying only ₩6,000 for each. The total assumed sale value is 50 × (8,666.666… − 6,000) = ₩133,333.333…. Add that cash to the ₩866,666.666… of shares you keep, and the total is the original ₩1,000,000. This values your complete opportunity, not one particular rights certificate. The number and trading unit of real certificates depend on the offer.

The final column puts subscription money and rights proceeds into the comparison. It is not a bank-account balance or a measured investment return. Real rights can trade at different prices, have limited trading periods or be non-transferable. A missed subscription deadline need not produce an automatic cash payment.

Ownership dilution and a fall in value

The non-participating holder falls from 10% to about 6.67%, calculated as 100 ÷ 1,500. That smaller share of the company is called ownership dilution. In the discounted issue above, letting the entitlement lapse also reduces the model share value. Selling a transferable entitlement preserves the model's total amount while leaving the smaller ownership percentage.

Change the subscription price to ₩10,000 as a separate example. The company then receives ₩5,000,000; (₩10,000,000 + ₩5,000,000) ÷ 1,500 = ₩10,000. A holder who keeps just 100 shares still owns 6.67%, but the shares remain worth ₩1,000,000 in that model. A percentage change alone cannot tell you the monetary loss.

The company’s reason for raising money is a further question. Using it to buy equipment, build something or repay borrowing changes future results in different ways. The share-issue arithmetic traces cash and ownership. It cannot tell you whether the use of that money will earn enough, or whether you should participate.

One extra share for every share held leaves the fraction unchanged

Return to the original company before the cash issue. A 100% bonus issue gives one additional share per existing share. You go from 100 to 200 shares, and the company's total goes from 1,000 to 2,000. Your fraction remains 10%.

With the same ₩10,000,000 assigned to all the shares, the model price is ₩5,000. Your 200 × ₩5,000 equals the previous 100 × ₩10,000. No cash enters the company in this bonus transaction. Actual prices can move as investors reassess the business and trade; the halved price here isolates the share-count change.

Stated capital can increase while total book equity stays the same

A separate example follows the entries in the accounts. Each share has a formal assigned amount called par value, which is different from its market price. At ₩1,000 par value, 1,000 existing shares give stated capital of ₩1,000,000. Add ₩1,000,000 of reserves legally available for this transfer and ₩3,000,000 of other equity. Issuing 1,000 bonus shares moves that ₩1,000,000 from reserves into stated capital.

The table still adds up to ₩5,000,000 of book equity—the assets left after bills and other liabilities are subtracted in the accounts. That sum differs from the earlier ₩10,000,000 market capitalization, which used the share price set in the model. Stated capital is only one part of book equity. Doubling that part by reducing another part adds nothing to the accounting total, and this transfer alone adds nothing to the model market value.

A pure stock split can also increase your share count while preserving your proportional stake, but its mechanism differs from this reserve capitalization. The resolution identifies which action is taking place. Our stock split and reverse split guide follows the unit changes; P/E, P/B and ROE separates market prices from accounting figures.

Funding terms, entitlements and deadlines

The company’s notice should tell you how much money it plans to raise, who can buy the shares and the price they must pay. Check whether the price can change. For a rights offer, find how many shares your holding lets you apply for, whether you can sell that opportunity, and when. The final day to apply, final day to pay and expected day the new shares begin trading are different dates. Match the notice with your broker’s instructions.

For bonus shares, find which eligible reserves are being moved, the number of extra shares per old share, the date used to determine who receives them and what happens to fractions smaller than one share. Both examples assume one ordinary share class, no company-held treasury shares and no fractions. Taxes, fees, delays and other simultaneous company actions are excluded.

A larger share count becomes meaningful alongside the price, ownership fraction and money paid or received. Actual execution prices are a further question, covered in market and limit orders.

Sources and assumptions

• Korea Law Information Center: Commercial Act, Article 416 (Korean) — new-share numbers, price, payment and subscription arrangements, including contributions in kind.
• Commercial Act, Article 418 (Korean) — shareholder allocation rights and third-party allocation.
• Commercial Act, Article 461 (Korean) — reserve capitalization and proportional new-share allocation. The retrieved Act is effective from 10 September 2026.

The Korean legal distinctions use the three Commercial Act provisions above, checked in the version effective 10 September 2026. This is an independently written explanation, not a legal assessment of a particular offering.

Both languages use the same invented Korean-won model, with cash subscription, one ordinary share class, full subscription and proportional allocation. Treasury shares, special classes, fractions, taxes, fees, timing effects, other corporate actions and changes in business value are excluded. Selling rights separately assumes a transferable entitlement sold in full at its model value.

Calculations retain unrounded values, then display prices and percentages to two decimals and other amounts to the nearest won. They do not reproduce an exchange’s official reference-price formula or forecast a market price. See our editorial policy.