A capital increase involves many processes with which many shareholders are unfamiliar. Find out how many rights you will receive for your shares and how many new shares you can buy.
EDP already has many shares on the stock market but is preparing to have even more. To finance the purchase of Viesgo, the electric company has advanced with the issuance of 300 million new securities to be subscribed by investors. The current shareholders will receive rights that will allow them to subscribe to these new securities, but it is not always easy to see how many they will be able to acquire.
A capital increase involves many terms, but also processes, of which not all shareholders are familiar, especially those of EDP, who have never experienced one. Therefore, it is relevant to explain what is happening.
First, EDP shareholders will receive rights to subscribe for the new shares. For each share held, they receive one right. At that moment, the value of the shares will be adjusted to that of the subscription rights. That is, EDP’s share price will be deducted from the value of the subscription rights, which in turn will present the value corresponding to the adjustment.
At this moment, investors can decide what to do with the subscription rights: either sell them on the stock exchange – if they do not intend to take part in the operation -, or use their rights to buy new shares.
One share gives one right, but one right won’t give a share, bearing in mind that only 300 million new shares will be issued in a company represented so far by 3.6 billion securities. Each right will only allow the purchase of 0.085035375 new shares. i.e. more rights will be needed to get a new share. It will take at least 12 shares to buy a new one.
Assuming you have 100 shares of EDP, you could, in theory, buy 8.5 shares of the company in the capital increase. However, there are no half shares, so considering the rules defined in the operation, the investor will only be able to exercise the rights to buy 8 securities.
Whoever has 1,000 securities can buy 85 new shares of EDP, while an investor who has 5,000 shares of the national electricity company in his portfolio will be able to exercise the rights to subscribe for 425 shares.
In any case, some money must be invested in order to have the new shares in the portfolio. EDP has defined that the subscription value of each share is 3.30 euros. For example, someone with 100 securities will spend 26.40 euros for 8 shares, those with a portfolio fuller of shares, such as 5,000 securities, will have to invest 1,402.50 euros in the capital increase.