CHEAP NEW SHARES 157

There is another kind of Bonus share, which is
not exactly a Bonus share, but carries a bonus with
it. This comes into being when the directors of a
company sell new shares to existing shareholders at
a price below the terms which they might have
obtained if they made a new issue to the general
public. The classical example of this system is the
Aerated Bread Company, that concern to which
City clerks and journalists and others owe so much
as pioneers of cheap and simple catering. It will be
remembered that in the palmy days of this company,
before it had been severely cut into by competition,
its £i shares used to stand in the neighbourhood of
£15. The directors used then to make issues of
new shares to existing shareholders at their face
value, that is to say, at £i per share, although it was
obvious that if they had made a public issue inviting
all and sundry to subscribe they could have sold
their new issues at or above £14 per share. This
system put an enormous bonus in the pockets of the
existing shareholders at the expense of the company
and its future prospects. The directors practically
gave to the existing shareholders a present of £130,000
if they sold them 10,000 new shares for £10,000,
which they and the public would have readily sub-
scribed for at £140,000. There was nothing wicked
about the process, but it was extremely shortsighted,
If the company had retained the monopoly which
its pioneer work as a cheap caterer for a long time
secured it, it might have kept its prosperity unim-
paired even by this shortsighted finance. As it was,
stiCcess attracted several competitors, some of which