Subscription Rights

One way to increase the share capital is by issuing new shares with Subscription Rights (SR) by the company.

In this case, every shareholder holding shares on the record date for the Subscription Rights will receive SR from the company, which will be registered in their brokerage account. The company sets the record date for the SR, on which the shareholder must hold shares in their account (they must acquire them at least two business days before the record date for the Subscription Rights). By receiving SR from the company free of charge, the shareholder has the opportunity to purchase new shares at a specified issue price. Very often, the issue price is lower than the market price of the shares.

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Assuming that one share entitles the holder to one Subscription Right, the settlement will look as follows:

1 existing share : 1 Subscription Right
Each SR entitles the holder to subscribe to a specified number of new shares.

Issue price of the shares x number of shares entitled to.

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The Subscription Right can be sold (if it is listed on the stock exchange) or used to subscribe for new shares in the so-called first and second periods. In the first period, as a basic subscription, available to shareholders who have the required number of SRs in their accounts, and in the second period, as an additional subscription, available to shareholders who held shares in the company on the record date for SRs.

If the shareholder subscribes, they will acquire the right to new shares. If they sell the SR, they will lose that opportunity but will gain additional funds in their brokerage account. If the shareholder neither subscribes for new shares nor sells the SR, the SR will be removed from their brokerage account by the KDPW (National Depository for Securities).

If the shareholder subscribes for new shares, the SR will be replaced by PDA (right to shares) in the brokerage account, which can then be seen in the stock market listings. The PDA awaits the decision of the registration court to later become actual shares.

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