Rights issues, bonus shares and splits

Why share counts change

A company's value is spread over its shares. Change the number of shares and, unless new money comes in, each share represents a smaller or larger slice of the same company. That is the single idea behind all three actions below. A rights issue brings new money in and creates new shares; a bonus issue creates new shares from reserves without new money; a split simply cuts the existing pie into more pieces.

In every case the company announces the terms and a book closure date. Whoever is on the CDS register at the end of that day is entitled. Because the NSE settles on T+3, a purchase has to be made at least three working days before book closure to count, exactly as with a dividend.

Rights issues

A rights issue is an offer to existing shareholders to buy new shares, in proportion to their holding, at a price the company sets, usually below the market price to make the offer attractive. You have three choices: take up the rights and pay, sell the rights to someone else during the offer period if the rights are renounceable and traded, or do nothing and let them lapse. Doing nothing means your percentage of the company shrinks.

The arithmetic that matters to a holder is the theoretical ex-rights price. Say you hold 100 shares trading at KES 10 and the company offers one new share for every two held at KES 6. After the issue you hold 150 shares. The value of the position is 100 × 10 + 50 × 6 = KES 1,300, so each share is worth about KES 8.67. The market price tends to open near that figure once the shares go ex-rights, which is why the fall on that day is not a loss: the difference sits in the extra shares.

Bonus issues

A bonus issue (also called a scrip or capitalisation issue) hands existing holders free shares in proportion to their holding, funded by moving reserves into share capital. No money changes hands and the company is worth the same the day after, so the price adjusts down by the ratio: a one-for-one bonus roughly halves the price and doubles your shares. Companies use it to bring a high share price down to a more traded level, or to reward holders when cash is tight.

The NCBA and StanChart cases show a common 2020 pattern: with regulators asking banks to conserve cash during the pandemic, boards replaced a cash dividend with shares. A holder of 1,000 NCBA shares received 100 more instead of KES 1,500 in cash. CDSC's FAQ confirms bonus shares are credited directly into the CDS account, and no withholding tax is deducted when they arrive; they are taxed like any other shares only when sold, which for listed shares means no capital gains tax.

Splits and consolidations

A share split divides each existing share into several: in a one-into-five split, 100 shares at KES 500 become 500 shares at KES 100. Nothing else changes: the company's value, your percentage and the dividend you receive in total are all the same. Companies split when a high price per share makes small purchases awkward; since the NSE allowed single-share trading in August 2025 that reason has weakened, and splits on the exchange have been rare.

A consolidation (reverse split) does the opposite, combining several shares into one to lift a very low price. Fractions left over are usually paid out in cash. Neither action is a dividend and neither creates or destroys value; a split simply changes the unit.

What you see on KenyaStocks

The daily closes on a company page are the prices as traded on each day. After a bonus issue or split the price series drops by the ratio, and a chart drawn from raw closes would show a cliff that no holder actually experienced. KenyaStocks keeps a table of corporate actions with a source for each row, and where a row exists the long-run chart and the Backtest figures adjust for it so the history reads as a holder would have felt it.

Rights issues are different: the new shares were paid for, so the price is not mechanically adjusted, though the theoretical ex-rights drop shows in the series. The announcement itself appears in the company's news as publishers report it.

A holder's checklist

1. 1

   Read the announcement

   Ratio, price (for rights), book closure date, offer period and payment date. Companies publish it on the NSE and in the press; your broker forwards it.

2. 2

   Check you are on the register

   Holdings that settled by the book closure date count. A purchase made within three working days of it does not.

3. 3

   For a rights issue, decide before the offer closes

   Take up and pay through your broker, sell the rights if they are traded, or let them lapse. The broker's app shows the offer under corporate actions.

4. 4

   Check your CDS statement afterwards

   Bonus and split shares appear automatically; rights shares appear after allotment. Email statements from CDSC are free.