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What Is a Capital Increase?

A capital increase is a corporate action in which a company raises funds by issuing new shares, increasing its paid-in capital and the number of shares outstanding.

Why it is carried out

A capital increase is a way for a company to fund capital expenditure, business expansion, or balance-sheet strengthening by issuing shares rather than taking on debt. Unlike borrowing, it does not add debt that must be repaid, but it does dilute existing shareholders' relative ownership stake.

What to keep in mind

There are several methods of raising capital, targeting different investors and involving different terms, each with its own effect on existing shareholders. It is important to check, alongside the terms and number of shares issued, whether the intended use of the funds is a reasonable growth investment and whether the degree of dilution is appropriate.

This article is provided for general informational purposes only and does not recommend or solicit the purchase or sale of any specific investment method or security. Final investment decisions are your own responsibility.

Frequently Asked Questions

Does a share price fall when a capital increase is announced?
Issuing new shares increases the number of shares outstanding, which causes 'dilution' — a reduction in existing shareholders' per-share earnings and voting-rights ratio — so the move can be seen as negative for the share price. That said, the reaction is not always a uniform decline, and depends on how the market evaluates the intended use of the funds raised.
What are the main types of capital increase?
These include public offerings aimed at an unspecified number of investors, third-party allotments in which new shares are allocated to a specific party, and rights offerings in which existing shareholders are allocated subscription rights.

Related terms