Scrip or capitalisation issues

Sometimes there are technical or practical reasons why a company may decide to increase the share capital in issue without actually raising any cash from shareholders. This can be achieved by capitalising some of its surplus reserves (a scrip or bonus issue) and increasing the number of shares in issue. The new shares created are then issued to existing shareholders on a pro-rata basis. Any previous per share values are adjusted by applying a correcting or compensating factor.

Calculation of adjustment factors