Capital Increase Subscription

What is a Capital Increase?

A capital increase is when a listed company raises additional money by issuing new shares. 

This usually happens through a rights issue, which gives current shareholders the first opportunity to buy those new shares at a subscription price (often lower than the market price)

What are Rights Issues?

A rights issue is an invitation from a company to its shareholders to participate in a capital increase by buying new shares.

• Only shareholders on the record date are eligible.
• Rights are proportional to the number of shares you already own.
• Rights can be traded meaning you can sell them if you don’t want to subscribe.

Why do companies raise capital?

Companies may increase their capital to:

• Fund expansion plans
• Finance new projects
• Reduce debt

Why are rights issued to shareholders?

Because the subscription price of the new shares is usually lower than the current market price, rights compensate existing shareholders for this difference.

Important Concepts to Know

1) Percentage of rights to shares

Each share you own gives you a number of rights. Example: 1 right for every 12.36 shares.

This depends on each company’s discretion.

2) Record Date

Shareholders who hold shares at the end of trading on the record date are eligible.

3) Rights trading

• Rights appear in your portfolio with a ticker like: COMPANY_R
• If you don’t want to subscribe, you can sell the rights before trading ends.
• If you weren’t a shareholder at the record date, you can buy rights and still subscribe.

What are my options as a shareholder?

Option 1: Sell the rights

• Sell them on the market during the trading period.
• The right will appear in your portfolio with the ticker + “_R”.

Option 2:  Keep the rights and subscribe

You will receive an email from Thndr with:

• Rights trading date
• Subscription deadline
• Subscription price
• Subscription form

If you do not sell or subscribe, you lose the value of the rights.

If Thndr is your custodian

• Fill out the form sent in the email.
• Make sure your account is funded: Number of rights × subscription price
• Custodian charge: EGP 60 (free for Thndr Trader subscribers)

If KFH (AUB previously) is your custodian

• Ask support to release your rights.
• Get a statement from the bank.
• Submit subscription at any designated branch.
• Inform support after submission.

What happens after rights trading ends?

You can no longer sell the rights. 

What happens after the subscription ends?

• Some capital increases could have an allocation and you may receive less than what you subscribed for if the issue is oversubscribed.
• Conversion of rights to shares takes 1–3 months.

First tranche

• You can only subscribe to the rights you own.
• Longer period.
• No oversubscription.

Second tranche

Happens only if the company decides.

• You can subscribe for any number of shares (as long as you hold at least 1 right).
• Shorter period.
• Allocation may reduce final shares received if demand exceeds supply.

What are the risks of participating in capital increases?

• Share price may decline.
• Liquidity is locked for months.
• Company fundamentals may weaken.

Disclaimer

Converting rights into shares can take 1-3 months to be completed depending on the company.