In short
- A rights issue asks you for more money, at a discount, in proportion to what you own. Ignoring it dilutes your stake.
- A bonus issue gives you extra shares from the company’s reserves. You own more shares of a slightly cheaper company — your share of it is unchanged.
- A share split divides each share into several. Nothing changes except the number and the price.
- All three are announced with dates attached. The dates are the part that costs money to miss.
Dividends are the corporate action everyone understands. These three cause more confusion than anything else on the Nairobi Securities Exchange — partly because two of them hand you extra shares and feel like a gift, and one of them asks for money and feels like a bill.
Rights issue: the company asks you for money
A company that needs capital can go to its existing shareholders first. A rights issue offers you new shares, usually below the market price, in proportion to what you already hold — “one new share for every four held”, for example.
You have three choices:
- Take it up. Pay for your rights and receive the new shares. Your proportion of the company stays roughly the same.
- Sell the rights. In Kenya, rights are usually tradable on the exchange for a set period. You can sell the entitlement itself to somebody else and keep the proceeds without putting in new money.
- Do nothing. The rights lapse. Your stake is diluted — the company has more shares in issue and you hold the same number of them.
The third option is the expensive one, and it is the one most small shareholders choose by accident, usually because the letter went to an old address. Keeping your details current with your broker is not admin; it is money. Our guide to checking your CDS account covers how to do that.
Should you take up a rights issue?
The discount is not the reason. Ask what the money is for: a company raising capital to grow is a different proposition from one raising capital to survive. Read the information memorandum, look at why previous capital did or did not produce results, and decide as if you were buying the share fresh today — because effectively you are.
Bonus issue: extra shares, same cake
A bonus issue — sometimes called a scrip issue — converts part of the company’s reserves into new shares and hands them to existing shareholders free, in proportion to holdings. A one-for-five bonus gives you one extra share for every five you hold.
Nothing of value has been created. The company is worth what it was worth; it is now divided into more pieces, so the share price adjusts down accordingly. What you own is the same fraction of the same business.
Why do it? Usually to make the shares more affordable and more actively traded, and sometimes to signal confidence in retained earnings. It is not a dividend and no cash leaves the company. If you are unsure how a bonus issue is treated for tax in your circumstances, ask a tax adviser rather than assuming it follows the dividend rules.
Share split: the same thing, cut smaller
A split divides each existing share into several. In a one-for-ten split, one share priced at KES 200 becomes ten shares priced around KES 20. Your total value is unchanged on day one.
The purpose is accessibility: a lower price per share widens the pool of buyers, and since the NSE moved to single-share trading in August 2025 the arithmetic of small orders got easier anyway. A split is not a reason to buy, and a high share price is not a reason to avoid a company — see how much you need to start investing.
The dates that matter
Every corporate action comes with a timetable, and all three of these share the same critical idea as a dividend: there is a record date — the day the register is examined to decide who is entitled. Buy after it and the entitlement belongs to the seller, not to you.
For a rights issue there are usually several dates: the announcement, the record date, the period during which rights trade, and the final date for payment and acceptance. Miss the last one and the rights lapse whatever you intended.
Ipahco’s corporate calendar tracks announced dividends and corporate actions for the companies we follow, so a date does not pass unnoticed.
See this on the NSE, not in theory
Ipahco screens every company listed on the Nairobi Securities Exchange, tracks dividends and shows you which licensed brokers will open an account for you.
What to do when the letter arrives
- Check what it actually is. Rights, bonus or split — the three ask completely different things of you.
- Find the deadline. Write it in your calendar the day you read the letter.
- For a rights issue, decide early. Take up, sell the rights, or deliberately let them lapse. Deciding by default is still deciding.
- Tell your broker your details are current. Most missed entitlements are missed because nobody could reach the shareholder.
Frequently asked questions
What happens if I ignore a rights issue?
The rights lapse and your shareholding is diluted: the company has more shares in issue while you still hold the same number. In most Kenyan rights issues you could instead have sold the rights on the exchange.
Is a bonus issue free money?
No. You receive more shares and the share price adjusts down, so the value of your holding is unchanged on the day. The benefit, if any, comes later from the company’s performance.
What is the difference between a bonus issue and a share split?
A bonus issue capitalises reserves and issues new shares from them. A split simply divides existing shares into smaller units. The visible effect on your holding is similar; the accounting is not.
Can I sell my rights instead of taking them up?
Usually yes. Rights in Kenyan issues generally trade on the NSE for a defined period before acceptance closes. Your broker can place the sale.
Do I need more money for a bonus issue or a split?
No. Both are free to existing shareholders. Only a rights issue asks you to pay for the new shares.
Education, not investment advice. The terms of each corporate action are set out in the company’s own circular — that document, not a summary, is what you act on.