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 L1 shares used to stand in the neighbourhood of L15.  The directors used then to make issues of new shares to existing shareholders at their face value, that is to say, at L1 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 L14 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 L130,000 if they sold them 10,000 new shares for L10,000, which they and the public would have readily subscribed for at L140,000.  There was nothing wicked about the process, but it was extremely short-sighted.  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 unimpaired even by this short-sighted finance.  As it was, attracted several competitors, some of which were extremely well managed and financed, and although it still does a most useful work for the community, its earning power has suffered considerably.  But this is only an extreme example of a system which is reasonable enough if it is not carried too far.  The Canadian Pacific Railway, for instance, has for many years adopted a very moderate use of this system, making new issues to its shareholders on terms rather cheaper than it could have obtained by a public issue, but not giving away enough to impair its future seriously in order to make presents to the existing stockholders by this means.  By the continued making of small presents to their constituents the directors of the company have obtained the support of a very loyal body of stockholders, who feel that they are being well treated but not pampered.  This system of granting a small bonus to existing shareholders on occasions when the company has to issue new capital is one which is quite unobjectionable as long as it is not abused.  If, owing to the use of it, the directors are encouraged to finance themselves badly, that is to say, to pay out of new capital for improvements and extensions which a more prudent policy would have financed out of earnings, just because they find that these issues carrying a small bonus makes them popular with the stockholders, then the system is being abused.  Otherwise there seems no reason to object to a measure which keeps the shareholders happy and does not do any harm to the concern so long as it is worked in moderation.