What a directed share issue means for existing owners
For existing shareholders, a directed share issue normally means dilution, since they do not get priority to subscribe for new shares. At the same time, the issue can strengthen the company's financial position and long-term value.
It is therefore important to weigh the short-term dilution against the potential benefit that the capital and the new owners can bring to the company.
How a directed share issue is usually carried out
A directed share issue follows a clear but more selective structure than other types of share issue.
- Shares are offered to one or more selected investors
- The decision is made by the general meeting or by the board under an authorisation
- The subscription price is set through negotiation or a market assessment
- Capital is added to the company directly upon completion
- The ownership structure changes in connection with the issue
When the process is clear from the start, it becomes easier to understand how the issue affects both the company and the ownership structure.
When companies choose a directed share issue
Worth bearing in mind
Directed share issues are used when time, flexibility or particular expertise is decisive. By approaching a limited number of investors, the company can complete the capital raise more quickly than with broader share issues.
The arrangement is common in growth phases, in acquisitions or when the company wants to strengthen its ownership base with investors who bring more than just capital.
Frequently asked questions
What is the difference between a directed share issue and a rights issue?
A directed share issue is offered to selected investors, whereas a rights issue is aimed at existing shareholders.
Why do companies use directed share issues?
To raise capital quickly or bring in strategic investors with relevant expertise or networks.
Do existing shareholders have to approve a directed share issue?
A decision at a general meeting is often required, especially if the issue involves a departure from the shareholders' pre-emption rights.
Can a directed share issue be made at a discount?
Yes, the subscription price can be set below the market price depending on the terms, the risk and the negotiation.
How does a directed share issue affect shareholders' ownership stakes?
Existing owners' stakes normally decrease because new shares are issued without them being able to take part.