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HKSI PrepStudyingPaper 1
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An investor holds 1,000 shares at HK$36 cum-bonus. The company makes a 1-for-5 bonus issue. Ignoring market movements, which of the following are CORRECT? I. She pays nothing for 200 new shares. II. The theoretical ex-bonus price is HK$30. III. Her holding becomes worth HK$43,200. IV. Her percentage interest is unchanged.
A bonus (capitalisation) issue allots fully paid shares out of reserves or profits, in proportion to holdings, with no money paid (Main Board Listing Rule 7.28). A 1-for-5 issue gives 1,000 / 5 = 200 new shares free, so I is correct. Nothing of value enters the company, so the price adjusts: HK$36 x 5 / 6 = HK$30, and II is correct. Her holding is 1,200 x HK$30 = HK$36,000, the same as before (1,000 x HK$36), so III, which values the new shares at the old price, is wrong. Every holder receives shares in proportion, so her percentage interest is unchanged and IV is correct. Source: HKEX Main Board Listing Rules r.7.28 (capitalisation issue); standard ex-bonus price adjustment (as at October 2026).
Valuing the bonus shares at the cum price. A bonus issue only splits the same value over more shares; the price falls in proportion.
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