Capital increase from company funds

A capital increase from company funds (Sections 207-220 AktG) is the conversion of open reserves into share capital. The companies therefore do not receive any financial resources from outside through shares. The equity merely changes its composition: the reserves decrease and the nominal capital increases accordingly.

As part of this capital increase, the shareholders will receive additional shares according to their previous capital stake. As they are undistributed profits from previous years, reserves are due to the shareholders. The share of each shareholder in the company's assets thus remains unchanged; the company's assets, which have remained the same, are offset by a higher number of shares. Mathematically, the price of the individual share must therefore fall.

meaning

Capital increases from company funds are rare. Although they do not change anything materially, they are by no means as pointless as it seems. In practice, they are interpreted as an expression of a particularly solid financial and earnings position, which strengthens confidence in the company concerned. The announcement of “free shares” therefore usually has a price-increasing effect.

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