Rights Issue vs Bonus Issue Singapore

A rights issue gives existing Singapore shareholders the right to buy new shares at a discounted price, raising fresh capital for the company. A bonus issue distributes free additional shares to existing shareholders from retained earnings — no new capital is raised.

This page is for informational purposes only and does not constitute financial advice. Always do your own research or consult a licensed financial adviser before investing.

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What Is a Rights Issue?

In a rights issue, a Singapore-listed company (or S-REIT) offers existing shareholders the right — but not the obligation — to purchase additional shares/units at a discounted price, typically 5–20% below the prevailing market price. The number of rights is proportional to existing holdings (e.g., 1 rights unit for every 5 held).

Rights issues are common among S-REITs seeking to fund acquisitions without taking on excessive gearing. For example, a REIT may do a 1-for-5 renounceable rights issue at S$1.20 when the market price is S$1.40 — giving rights holders a theoretical value of S$0.04 per existing unit (the TERP discount).

Rights are renounceable (tradeable on SGX for a period) or non-renounceable. If you don’t want to subscribe, you can sell your nil-paid rights on SGX during the trading window — typically 5 business days. If you do nothing, your rights lapse and you are diluted.

What Is a Bonus Issue?

A bonus issue (also called a scrip issue or capitalisation issue) distributes free additional shares to existing shareholders. No cash changes hands — the company converts retained earnings or share premium reserves into issued share capital.

Example: A 1-for-10 bonus issue means you receive 1 free share for every 10 you hold. If you hold 1,000 shares, you now hold 1,100 shares. However, the share price adjusts downward proportionally — if the stock was at S$2.20, it becomes approximately S$2.00 post-bonus (all else equal).

Bonus issues do not raise capital. They are often used to improve share liquidity (lower price makes shares more affordable), signal management confidence, or to capitalise retained earnings for accounting purposes.

Rights Issue vs Bonus Issue: Key Differences

Here is a clear comparison for Singapore investors:

How Are S-REIT Rights Issues Structured?

S-REITs use rights issues frequently in Singapore, typically structured as renounceable underwritten rights — meaning a bank underwrites the issue to guarantee the capital raise even if shareholders don’t subscribe.

The key metric to evaluate is the TERP (Theoretical Ex-Rights Price): TERP = (Market Price × Existing Units + Rights Price × New Units) ÷ (Existing + New Units). If the acquisition funded by the rights issue is DPU-accretive at the rights price, the issue is generally considered positive for unitholders.

Watch for two red flags: (1) Rights issues to fund refinancing or plug debt gaps (dilutive with no upside), and (2) highly discounted rights at >25% discount suggesting the REIT is in distress. Learn more about REIT financial health via our Gearing Ratio Calculator.

What Should You Do During a Rights Issue?

When you receive a rights issue notice from your CDP-linked brokerage, you have four options:

1. Subscribe in full — maintain your percentage ownership and benefit from the discounted price. Best if you believe the acquisition is DPU-accretive.
2. Subscribe partially — subscribe for some rights and sell the rest on SGX during the nil-paid rights trading window.
3. Sell all nil-paid rights — receive cash for the right to subscribe without committing fresh capital. The rights trade at approximately (Market Price − Rights Price) per right.
4. Do nothing — your rights lapse; you are diluted proportionally. Avoid this unless the rights are deeply out-of-the-money.

Check your brokerage (FSMOne, DBS Vickers, moomoo, Tiger Brokers) for the exact deadline to submit subscriptions — usually 5–7 business days before the close date. Use our Retirement Calculator to model the impact on your portfolio income.

Tax Treatment of Rights Issues in Singapore

In Singapore, rights issues and bonus issues have no immediate personal income tax impact for individual investors. When you subscribe to a rights issue, the cost basis of your new shares is the subscription price paid. Capital gains are not taxed in Singapore, so any subsequent gain on disposal is tax-free.

Bonus shares are treated as additional shares with zero cost basis (as no payment is made). This is important when calculating the effective yield on your investment — your original capital is now spread across more shares.

Frequently Asked Questions

© The Kopi Notes · Singapore Investing Glossary · All figures as at Q2 2026. Not financial advice.