Friday, August 21, 2015

The Capital Increase - join or without?

The Capital Increase - join or without?
Capital Increase. From a capital or capital increase is when a corporation issues new shares, thereby increasing its equity. What does this mean for shareholders and how they should behave when "their" company is planning such a measure? With a capital increase, the issue of new shares in addition to the existing papers, is a corporation "fresh" money procured. Since shares are equity, the equity ratio is increased by this measure. That's good, at first glance, as a company basically stands on a sounder footing with more equity. The money belongs to the owners and not a third party, eg. As the Bank, and thus can be freely used by the owners, the shareholders.

But a capital increase may also involve risks. For the shareholder is crucial, the position in which the capital increase is carried out and what the money is to be used, about to redeem debt or to finance an expansion. The problem may be a capital increase when the fresh money in spite of everything is not sufficient to result z. B. the debt in a "sufficient" degree or implement an expansion with success.

Then threatening losses or at worst a failure. The problem for investors is that it can in advance difficult to assess whether a capital increase will be successful or not. Shareholders must approve a capital increase. Private investors have usually had little influence on that decision, since the majority of shares and hence voting rights of banks, insurance companies and funds are held, which have received the most votes.

The ordinary capital increase
From an ordinary capital increase is when the company issues shares will and receives usually cash. Basically, any number of new (young) shares may be issued. The price of the new shares shall be at least the nominal value of shares, usually a Euro match. The price ceiling is the market price of the old shares on the date of issue of young papers.

Capital are usually approved at the Annual General Meeting and the company can authorize the operation for up to five years in advance. The Company may so choose a convenient time for the action, eg. As a phase in which prices rise strongly, because they can get more money for the new shares.

The conditional capital increase
There is also the conditional capital increase. Here the level of emission depends (number free shear shares) on the extent to which investors of conversion or subscription rights to exercise. Companies enter only rights to the subsequent purchase of shares. A widely used type of the conditional capital is the issue of subscription rights.

With subscription rights will ensure that the percentage of ownership in the total capital (number or value of all shares) remains the same. Because of a capital increase, the number of company shares and the weight of the individual paper increases decreases. Where: The new shares are often cheaper than the old ones were worth before the capital increase. Uses of shareholder subscription rights, the share in the capital of the company remains the same. He shall exercise the subscription rights is not sufficient, for example, because it is not convinced of the capital, or - much more profane - currently has no money for the measures, its share decreases in the share capital. The subscription rights may be sold on the stock exchange.

The question that arises is a shareholder, whether it is worthwhile for him to join a corporate action or not. The question can not be answered generally, because there are always votes for or against such a measure. Therefore, each shareholder must make the decision based on individual aspects of its own. Basically a capital increase approved and it can be gone through when one is convinced of the company (selection criteria for quality stocks have been repeatedly called) and you would buy without the measure shares of this company. If you have doubts about the quality of the company or the proposed measures to be financed by the capital increase, one should contrast fingers on it.

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