How is the issue price determined for a capital increase?

Setting the issue price for a capital increase is an important step that influences the interest of potential investors and has a financial impact on the company and existing shareholders. The exact method for setting the issue price can vary from company to company and depends on a number of factors. Here are some common approaches:

Market price based approach: the issue price can be based on the current market price of the shares being traded. This approach reflects the current value of the company on the open market. However, the issue price can also be lower than the market price in order to incentivize participation in the capital increase.

Bookable equity: The issue price could be set on the basis of the bookable equity per share. This involves dividing the company’s equity by the number of shares issued. This approach takes into account the intrinsic value of the company.

Discounted cash flow (DCF): In this approach, the issue price is derived from the company’s expected future cash flows and discounted to the present value. This approach requires assumptions about future cash flows, growth rates and discount rates.

Listing method: This method is based on the principle of supply and demand. The issue price is set to attract investor interest in subscribing for the new shares without diluting the price too much.

Negotiations: In some cases, the issue price is set through negotiation between the company and large investors, particularly in private placements.

Tender: The company may conduct a tender process in which investors submit bids to purchase the new shares. The issue price is then set on the basis of these bids.

All FAQs Published at: 2024-02-05