What does a share issue mean for shareholders?
When a share issue is carried out, it can affect shareholders' ownership stakes and influence. If new shares are issued without existing owners taking part, their stake can be diluted.
At the same time, a share issue can strengthen the company and increase the value of the shares over time. The outcome depends on the terms, the company's needs and how the capital is used after the issue.
How a share issue is usually structured
A share issue usually follows a clear structure in which terms, participation and execution are decided in advance.
- New shares or securities are issued
- Terms and price are set before the issue starts
- Existing owners may have pre-emption rights
- Capital is added to the company once the issue is completed
- The ownership structure may change
Once you understand these elements, it becomes easier to assess how the share issue affects both the company and you as an owner.
When a share issue becomes relevant for a company
Worth bearing in mind
A share issue is often carried out when the company needs capital to take the next step, for example for expansion, product development or acquisitions. It can also become relevant if the company wants to improve its financial position or reduce its debt.
For existing owners, it is important to understand why the share issue is being made. The purpose affects how the issue should be assessed and what consequences it may have for ownership and the company's future development.
Frequently asked questions
Why do companies carry out share issues?
Common reasons are to finance expansion, strengthen the company's finances or invest in new projects that require more capital.
What does dilution mean?
Dilution means that your percentage ownership stake decreases when more shares are created, even if you keep the same number as before.
Do I have to take part in a share issue?
No. It is voluntary. But if you do not take part, your ownership stake may decrease depending on how large the issue is.
How does a rights issue work?
Existing owners get the opportunity to subscribe for shares before other investors. This is often done through subscription rights.
Are share issues common in unlisted companies?
Yes. Since they often need to raise capital to grow, share issues are a central part of financing in unlisted companies.