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A share issue is the issuance of new shares by a company to raise additional capital. The company sells these new shares to investors and receives capital in return. This money can be used for growth, investments or the repayment of debt.
Through a share issue, the company often becomes larger, but ownership is spread across more shareholders.
When a company issues new shares, the total number of shares increases. As a result, existing shareholders own a smaller percentage of the company than before. This is called dilution. Sometimes existing shareholders are given priority to buy new shares so they can maintain their stake. The share issue can take place at a fixed price or through the stock market.
Short example:
Suppose a company has 1 million shares outstanding at a price of €10. The total market value is then €10 million. The company wants to raise €2 million and issues 200,000 new shares at €10 each. After the issue, there are 1.2 million shares. An investor who previously owned 10,000 shares held 1% of the company. After the issue, they still own 10,000 of the 1.2 million shares, which is approximately 0.83%.
Disclaimer: Investing involves risks. Our analysts are not financial advisors. Always consult a professional advisor when making financial decisions. The information and tips provided on this website are based on the personal insights and experience of our analysts and are intended for educational purposes only.
