XI

BONUS SHARES
July, 1918

A Deluge of Bonus Shares—The Effect on the Market—A Problem
in Financial Psychology—The Capitalisation of Reserves—
The Stock Exchange View—The Issue of Bonus-carrying
Shares—The Case of the A.B.C.—A Wiser Variation from
Canada—Bonus Shares on Flotation—An American Device
-—Midwife or Doctor ?—The Good and Bad Points of Both
Systems.

OF the many kinds of Bonus shares, the one which
has lately been most prominent in the public eye is
that which is produced by the capitalisation of a
reserve fund. There has lately been a perfect
epidemic of this kind of Bonus share, which is almost
as plentiful as the caterpillars in the oak trees and
the green fly on the allotments. The reason for
this outburst is apparently the anxiety which the
directors of many prosperous industrial companies
feel lest the high dividends which good management
and sound finance in the past have enabled them to
pay should lay them open to misunderstanding and
attack by well-meaning people who think that it is
a crime for a company to earn more than a certain
percentage on its capital,

This explanation was very frankly given by the

L