Companies can increase their equity capital with a capital increase. Such an increase can have different purposes. For shareholders, capital increases mean advantages on the one hand because they can hold their company shares through the subscription right, but on the other hand the share price can fall as a result of the increase. Some companies also prevent pre-emptive rights, so that shareholders' securities are worth less after the increase and they have fewer voting rights.
The capital increase is mostly important for investors, as the increase has an impact on the voting shares as well as on the dividend and the value of the shares.
Limited liability companies and companies with other legal forms can also carry out capital increases. You can read more about this later in this guide.
Reasons for a capital increase
There are many reasons for a capital increase of a public limited company:
- The company needs fresh capital because it is planning a takeover or needs money for investments, but its capital cover is too low for this.
- The company has debts that it needs to repay.
- The company is focusing on growth and wants to reach a broader investor base by issuing new shares.
Ordinary capital increase
In an ordinary capital increase, the company issues new shares. The shareholders have a fixed subscription right. The new shares are issued at a fixed subscription ratio to the old shares.
With a subscription ratio of 1:3, for example, the existing shareholders receive three new shares for one old share they hold. The subscription right compensates the existing shareholders so that they can retain their voting and dividend rights despite the issue of new shares.
Subscription right does not have to be exercised
Shareholders are not obliged to exercise their subscription right. However, after a capital increase they must then expect that their shareholding will decrease and the value of their shares will be "diluted".
Authorised capital increase
In an authorised capital increase, the AG's main board of directors is authorised to increase the AG's share capital up to 50 percent of the current share capital over a maximum period of five years. The authorisation is granted at the general meeting. In the following five years, the main boards then do not need any further approval to carry out the capital increase.
Such an increase may be necessary, for example, to allow companies to react flexibly to changes in the capital market and issue new shares without having to convene a general meeting.
Conditional capital increase
In a conditional capital increase, the increase is made conditional on investors taking up an offered share exchange. For example, the conditional capital increase can be effected through the exchange of convertible bonds. You can trade CFD on shares in with https://exness-ar.com/tnzyl-exness/ methods if you are not ready to commint big investment.
As a rule, no subscription rights are provided for existing shareholders in the case of a conditional capital increase. They could thus suffer a loss in the value of their shares, which depends on how many shares are created through the exchange of bonds.