Bezugsfrist

What Is Bezugsfrist?

The Bezugsfrist, commonly translated as "subscription period" or "offer period," is a defined timeframe during which existing shareholders of a company can exercise their pre-emptive rights to purchase new shares offered in a capital increase ³⁵, ³⁶, ³⁷, ³⁸, ³⁹. This concept is central to corporate finance and plays a crucial role in the dynamics of capital markets when a company seeks to raise additional equity. During the Bezugsfrist, shareholders have the option to subscribe to these new shares, typically at a predetermined subscription price, to maintain their proportionate ownership in the company. If these rights are not exercised or sold within the Bezugsfrist, they typically expire worthless³³, ³⁴.

History and Origin

The concept underlying the Bezugsfrist—the protection of existing shareholders' proportionate ownership—is rooted in the historical development of shareholder rights. Pre-emptive rights, which the Bezugsfrist facilitates, emerged prominently in the late 19th century as corporations expanded and issued new shares to raise capital. In³²itially, shareholder protections were often informal, which could lead to situations where new share issuances diluted the interests of minority investors. In response, the principle of pre-emptive rights was introduced, offering existing shareholders the first opportunity to purchase additional shares before they were made available to other investors. Th³¹ese rights evolved through legal frameworks, notably influencing corporate governance and aiming to safeguard shareholders from dilution of their ownership and voting power. Th²⁹, ³⁰e specific German term "Bezugsfrist" and its associated legal requirements, such as a minimum two-week period, are part of the German Stock Corporation Act (Aktiengesetz), reflecting a formalized approach to these shareholder protections.

#²⁷, ²⁸# Key Takeaways

The Bezugsfrist is the period during which shareholders can subscribe to new shares in a capital increase.
It protects existing shareholders' pre-emptive rights to maintain their ownership percentage.
Rights not exercised or sold within the Bezugsfrist typically expire without value.
The duration of the Bezugsfrist is legally mandated in some jurisdictions, such as a minimum of two weeks in Germany.
²⁵, ²⁶ Companies use this mechanism primarily to raise additional equity capital while offering first refusal to current owners.

Formula and Calculation

While there isn't a direct "formula" for the Bezugsfrist itself, as it is a time period, its implication is directly tied to the calculation of the theoretical value of a subscription right and the resulting share price after the rights issue. The value of a single subscription right (SRV) before the ex-rights date can be estimated using the following formula:

\text{SRV} = \frac{\text{Market Price} - \text{Subscription Price}}{\text{Subscription Ratio} + 1}

Where:

Market Price: The current trading price of the existing common stock before the rights issue.
Subscription Price: The price at which new shares are offered to existing shareholders during the Bezugsfrist.
Subscription Ratio: The number of existing shares required to subscribe for one new share. For example, if the ratio is 5:1, then 5 existing shares are needed to buy 1 new share.

After the ex-rights date (i.e., once the rights can no longer be exercised with the old shares), the theoretical value of the right (and thus the drop in the share price) is adjusted to:

\text{SRV (Ex-Rights)} = \frac{\text{Market Price} - \text{Subscription Price}}{\text{Subscription Ratio}}

This calculation helps investors understand the intrinsic value of the right they receive and how the share price is expected to adjust.

Interpreting the Bezugsfrist

The Bezugsfrist signifies a critical window for shareholders to act. From an investor's perspective, interpreting the Bezugsfrist involves understanding the choices available:

Exercise the Rights: Purchase new shares at the subscription price. This allows the investor to maintain their proportionate ownership and voting power, mitigating dilution.
Sell the Rights: If the rights are transferable, an investor can sell them on the stock market during the Bezugsfrist. This converts the value of the rights into cash without requiring additional investment.
Let the Rights Expire: If no action is taken, the rights typically become worthless after the Bezugsfrist ends, resulting in a loss of potential value and a diluted ownership stake.

The length of the Bezugsfrist, often a minimum of two weeks in Germany, provides shareholders with time to evaluate the offering, consider the company's valuation, and make an informed decision. Fa²³, ²⁴ctors influencing this decision include the difference between the market price and the subscription price, the investor's financial capacity, and their long-term outlook on the company.

Hypothetical Example

Imagine "GreenTech Innovations AG," a publicly traded company, announces a capital increase to fund a new sustainable energy project. GreenTech issues new shares at a subscription price of €20 per share, while its existing shares trade at €25. The company sets a subscription ratio of 4:1, meaning an existing shareholder receives one right for every share held, and four rights are needed to purchase one new share. The Bezugsfrist is announced to run from September 1st to September 15th.

An existing shareholder, Ms. Lena Meyer, owns 400 shares of GreenTech Innovations AG. She receives 400 subscription rights. To calculate how many new shares she can acquire, she divides her rights by the subscription ratio: 400 rights / 4 rights per new share = 100 new shares.

During the Bezugsfrist, Ms. Meyer has three choices:

Exercise: She can pay €2,000 (100 shares * €20/share) to acquire 100 new shares. After this, she will own 500 shares, maintaining her proportional ownership in the company.
Sell: If the rights are tradable, she could sell her 400 rights on the market. If each right trades at, say, €1.00, she would receive €400.
Do Nothing: If she takes no action by September 15th, her 400 rights expire, and her original 400 shares will represent a smaller percentage of GreenTech Innovations AG's increased total shares outstanding, resulting in dilution.

Practical Applications

The Bezugsfrist is primarily applied within the realm of rights issues, which are a common method for companies to raise fresh equity capital from their existing shareholder base. Key practical applications include:

Capital Raising: Companies utilize rights issues, governed by the Bezugsfrist, to secure funding for expansion, debt repayment, or specific projects without immediately resorting to a full public offering to new investors. UniCredit, for²² example, has undergone capital hikes that involve shareholders voting on capital increases, which would then be executed via a rights issue mechanism.
Sharehol²¹der Protection: The defined Bezugsfrist ensures that existing shareholder rights, particularly pre-emptive rights, are respected. This allows them to avoid unwanted dilution of their ownership and voting power.
Market T²⁰ransparency: The public announcement of the Bezugsfrist, along with the terms of the rights issue, provides transparency to the market. This allows investors and analysts to adjust their valuation models and expectations for the company's stock.
Regulatory Compliance: In many jurisdictions, the duration and announcement procedures of the Bezugsfrist are legally stipulated to ensure fair treatment of all shareholders and compliance with securities regulations. For example, i¹⁸, ¹⁹n Germany, the Bezugsfrist must be at least two weeks.

Limitation¹⁶, ¹⁷s and Criticisms

Despite its role in shareholder protection, the Bezugsfrist and rights issues have certain limitations and can draw criticism:

Risk of Under-subscription: If the subscription price is not sufficiently attractive, or if market conditions deteriorate during the Bezugsfrist, shareholders may choose not to exercise their rights. This can lead to a rights issue being undersubscribed, forcing the company to seek other, potentially more expensive, financing options or to rely on underwriting agreements with investment banking firms.
Share Pr¹⁴, ¹⁵ice Volatility: The period of the Bezugsfrist can be associated with increased volatility in the company's stock market price. If the market price falls significantly below the subscription price during this period, shareholders may find their rights effectively worthless, as it would be cheaper to buy shares on the open market.
Complexi¹³ty for Retail Investors: Understanding the mechanics of a rights issue, including the Bezugsfrist, subscription ratio, and the implications of dilution, can be complex for individual retail investors. This complexity might lead to some shareholders failing to act, resulting in the forfeiture of their rights and an unintended reduction in their ownership stake.
Potentia¹¹, ¹²l for Abuse (Historically): While modern regulations aim to prevent this, historically, pre-emptive rights, and by extension the Bezugsfrist, were sometimes subject to manipulation, particularly in closely held corporations, to disadvantage minority shareholders.

Bezugsfris¹⁰t vs. Zeichnungsfrist

While both "Bezugsfrist" and "Zeichnungsfrist" refer to specific periods in the context of securities issuance, they apply to different scenarios, though they can overlap in effect.

The Bezugsfrist specifically pertains to the period during which existing shareholders can exercise their pre-emptive rights to subscribe to new shares in a rights issue or capital increase. It is about maintaining an existing ownership percentage and avoiding dilution. The focus is o⁹n the rights of current owners.

The Zeichnungsfrist (subscription period in a broader sense) is the timeframe during which investors can "subscribe" or apply to purchase newly issued securities, such as shares in an Initial Public Offering (IPO) or new bond issues, before they begin trading on the secondary market. It is a general term for the period of primary market placement of securities to any investor, whether new or existing. While a capital increase with existing shareholder rights has a Bezugsfrist, the act of "drawing" or subscribing to those shares occurs within that period, making the Bezugsfrist a specific type of subscription period. In contrast, an IPO has a Zeichnungsfrist but no Bezugsfrist, as there are no existing public shareholders to whom rights are offered.

FAQs

What happens if I don't exercise my rights during the Bezugsfrist?

If you do not exercise your subscription rights or sell them (if transferable) within the specified Bezugsfrist, your rights will typically expire worthless. This means you lose the opportunity to purchase new shares at the discounted subscription price, and your percentage ownership in the company will be diluted because new shares will be issued to other investors.

Can I sel⁶, ⁷, ⁸l my Bezugsrechte (subscription rights)?

In many cases, yes. If the subscription rights are "transferable," shareholders can sell them on the stock market during the Bezugsfrist. This allows in⁵vestors who do not wish to invest more capital or who prefer not to maintain their exact ownership percentage to still realize some value from the rights.

Why do companies use a Bezugsfrist for new share issues?

Companies use a Bezugsfrist as part of a rights issue primarily to raise additional capital while upholding the pre-emptive rights of their existing shareholders. This method allows them to raise funds with less immediate pressure from external market fluctuations compared to a general public offering, and it fosters loyalty among their current investor base by offering them the first opportunity to invest.

Is the Bezugsfrist the same globally?

The core concept of a period for exercising subscription rights in a capital increase is common across financial markets, but the specific terminology, regulatory requirements, and typical durations (like the two-week minimum in Germany) can vary by jurisdiction. Terms like "subscription period" or "offer period" are used in other countries to describe similar windows.

Does exer³, ⁴cising rights during the Bezugsfrist always protect against share price drop?

Exercising rights during the Bezugsfrist prevents the dilution of your ownership percentage. However, the share price typically adjusts downward on the ex-rights date to reflect the issuance of new shares at a lower subscription price. While your overall economic value should theoretically remain the same if you either exercise or sell the rights, the per-share price will likely decrease. The long-term ¹, ²performance of the stock still depends on the company's financial health and market conditions.