Many investors panic when they hear that a company is planning a cash capital increase—some see it as a positive, while others worry about dilution of their shares. In fact, a cash capital increase itself is neither good nor bad; the key depends on three factors: what the company intends to do with the money, how the market perceives this plan, and whether you, as an existing shareholder, will be diluted.
Let's start with the basics.
What is a cash capital increase? How does it affect your shares?
The essence of a cash capital increase
A cash capital increase means the company issues new shares to existing shareholders to raise funds. It sounds simple, but it involves capital structure, shareholder rights, and even the company's future development direction.
Why does the company do this?
Companies usually choose to raise capital for several reasons: to expand business scale, invest in new projects, pay off existing debts, adjust financial structure, or respond to sudden challenges. Different purposes for the capital increase often lead to very different market reactions.
The process of a capital increase looks like this:
1. The company