Bezugsrecht

What Is Bezugsrecht?

A Bezugsrecht, also known as a subscription right or preemptive right, grants existing shareholders of a company the privilege to purchase a proportional number of new shares issued during a Kapitalerhöhung (capital increase). This mechanism falls under the umbrella of Corporate Finance and is primarily designed to protect shareholders from the Verwässerung of their ownership stake, voting power, and share of future earnings. When an Emittent decides to issue new Aktien, each existing Aktionär typically receives one Bezugsrecht per existing share held. These rights provide the opportunity to acquire "young shares" (neue Aktien) at a predetermined Bezugspreis (subscription price) before they are offered to the general public or other investors.

##²⁴ History and Origin

The concept of a shareholder's preemptive right, embodied in the Bezugsrecht, has deep roots in corporate law, particularly in civil law jurisdictions like Germany. It emerged as a fundamental protection for existing owners against the dilution of their ownership and influence when a company sought to raise additional Eigenkapital. Historically, companies have utilized rights offerings as a vital instrument for raising equity capital, often appealing directly to their most familiar and interested group: their existing stockholders. Thi²³s method of capital raising gained prominence as a straightforward way for companies to secure funds for various purposes, such as expanding operations, paying off debt, or financing acquisitions. For instance, in the aftermath of the 2008 financial crisis, many banks relied on rights issues to shore up their capital bases. Major rights issues by large financial institutions, like Citigroup in 2009, illustrate the scale at which this mechanism has been employed to strengthen a company's Bilanz.

##²² Key Takeaways

• A Bezugsrecht offers existing shareholders the primary opportunity to acquire new shares during a capital increase.
• Its main purpose is to prevent the dilution of a shareholder's ownership percentage and voting rights.
• Shareholders can either exercise their Bezugsrecht to buy new shares or sell the rights themselves on the market.
• The value of a Bezugsrecht is calculated based on the difference between the existing share's Kurs and the new share's subscription price.
• Companies can, under specific conditions, exclude Bezugsrechte, although this typically requires shareholder approval.

Formula and Calculation

The theoretical value of a Bezugsrecht can be calculated using a formula that considers the market price of the existing shares, the subscription price of the new shares, and the subscription ratio. The subscription ratio indicates how many existing shares are needed to acquire one new share.

Th²⁰, ²¹e formula for the theoretical value of a Bezugsrecht during the "cum-rights" period (when the share still trades with the right) is:

Where:

• Old Share Price (K_a): The market price of the existing Wertpapier before the rights issue.
• Subscription Price (K_n): The price at which new shares can be purchased by exercising the Bezugsrecht.
• Subscription Ratio (V): The number of existing shares required to subscribe to one new share. For example, a 5:1 ratio means 5 existing shares are needed for 1 new share.

After the "ex-rights" date, the share price will theoretically drop by the value of the Bezugsrecht, as the right has been detached from the share.

##¹⁹ Interpreting the Bezugsrecht

The value of a Bezugsrecht reflects the intrinsic value embedded in the right to acquire new shares at a discount. A positive Bezugsrecht value indicates that the new shares are being offered below the theoretical ex-rights price, providing a financial incentive for existing shareholders. Sha¹⁸reholders can interpret this value in two ways:

1. Exercise the Right: If the shareholder wishes to maintain their proportional ownership in the company and believes the new shares are a good investment at the discounted price, they can exercise their Bezugsrecht. This means they pay the subscription price to acquire the new Aktien.
2. ¹⁷ Sell the Right: If a shareholder does not wish to invest additional capital or maintain their percentage of Stammkapital, they can sell their Bezugsrechte on the market. The value received from selling the rights can help offset the theoretical price drop of their existing shares post-rights issue, ensuring a wealth reallocation rather than a loss in total asset value.

Th¹⁵, ¹⁶e market price of the Bezugsrecht, once traded independently, is also influenced by supply and demand, similar to any other Wertpapier.

##¹⁴ Hypothetical Example

Consider Company XYZ, whose shares are currently trading at €100. The company announces a capital increase with a Bezugsrecht offering, allowing existing shareholders to subscribe to new shares at a Bezugspreis of €80. The subscription ratio is 4:1, meaning an investor needs four Bezugsrechte to purchase one new share.

1. Calculate the theoretical value of one Bezugsrecht:

   $$\text{Bezugsrecht Value} = \frac{(€100 - €80)}{4 + 1} = \frac{€20}{5} = €4$$

2. Investor with 400 shares: An investor holding 400 shares of Company XYZ would receive 400 Bezugsrechte.

   • They can use these 400 rights to purchase (400 / 4 = 100) new shares.
   • The cost to acquire these 100 new shares would be (100 \times €80 = €8,000).
   • Alternatively, they could sell their 400 Bezugsrechte on the market for approximately (400 \times €4 = €1,600).

This example illustrates how the Bezugsrecht provides a clear financial option for existing investors, allowing them to either maintain their ownership or monetize their preemptive right.

Practical Applications

Bezugsrechte are primarily used by companies in Capital Markets to raise additional capital while providing a mechanism for existing shareholders to avoid Verwässerung.

• Capital Raising: ¹³Companies often use rights offerings to secure funding for strategic initiatives, debt reduction, or general corporate purposes without incurring significant underwriting fees typically associated with other forms of equity issuance. For instance, a company might need to raise funds to finance a large acquisition or expand its operations.
• Shareholder Protection: By offering a Bezugsrecht, companies enable their current shareholders to maintain their proportional stake, thus preserving their voting power and share of future Dividende distributions. This is especially important for large Aktionär groups or institutional investors who wish to maintain their influence.
• Liquidity Management: In times of financial distress, a rights offering can be a critical tool for companies to inject much-needed Liquidität into their operations when other financing options might be too costly or unavailable.
• Market Signal: The ¹²decision to conduct a rights offering can signal a company's commitment to its existing shareholder base, demonstrating a preference for internal financing over broad public offerings that might introduce new investors and dilute existing control. Public companies conducting rights offerings in the U.S. typically register the shares with the U.S. Securities and Exchange Commission (SEC) using forms like S-1 or S-3, ensuring regulatory compliance and transparency for investors.

Limitations and Critici¹⁰, ¹¹sms

Despite their advantages, Bezugsrechte and rights offerings have several limitations and criticisms.

• Dilution for Non-Participants: While the Bezugsrecht protects participating shareholders from dilution, those who do not exercise their rights (either by subscribing to new shares or selling their rights) will experience a dilution of their percentage ownership and voting power in the company. Their existing shares will ⁹also theoretically decline in Kurs by the value of the detached Bezugsrecht.
• Market Overhang: Th⁸e announcement of a large rights issue can create an "overhang" in the market, potentially depressing the existing share price as investors anticipate the influx of new shares and the potential for a larger capital base.
• Exclusion of Rights: In certain circumstances, companies may exclude Bezugsrechte, preventing existing shareholders from participating in a new share issue. This typically requires a supermajority vote by shareholders and must be justified by important reasons, such as facilitating strategic acquisitions or issuing employee shares. However, the exclusion can ⁷be a point of contention, especially if it leads to significant Verwässerung for minority shareholders who are unable to participate. Academic research has explored how rights offerings can lead to wealth transfers among shareholders, particularly if some shareholders are wealth-constrained and cannot fully participate.
• Complexity: For indiv⁶idual investors, understanding the terms, calculation, and trading of Bezugsrechte (sometimes referred to as Rechtehandel) can be complex, potentially leading to missed opportunities or unintended dilution if they fail to act within the stipulated subscription period.

Bezugsrecht vs. Bezugspreis

The terms Bezugsrecht and Bezugspreis are closely related but refer to distinct concepts in a capital increase.

Bezugsrecht is the right itself, granted to existing shareholders, allowing them to subscribe to new shares proportionally to their current holdings. It is a tradable privilege that has its own market value. Shareholders receive one Bezugsrecht for each existing share they own, and a certain number of these rights are required to purchase one new share.

Bezugspreis is the price at which these new shares can be purchased by exercising the Bezugsrecht. This price is typically set at a discount to the current market price of the existing shares to incentivize shareholders to subscribe. The Bezugspreis is a fixed monetary value per new share, whereas the Bezugsrecht is a transferable instrument representing the option to buy shares at that price.

In essence, the Bezugsrecht ⁵gives you the option to buy, and the Bezugspreis is the cost of exercising that option for each new share.

FAQs

1. Why do companies issue Bezugsrechte?

Companies issue Bezugsrechte primarily to raise additional capital while giving their existing shareholders the opportunity to maintain their proportional ownership stake and voting rights. This helps to prevent Verwässerung for current investors.

2. What happens if I don't⁴ exercise my Bezugsrecht?

If you do not exercise your Bezugsrecht, you have two main choices:
* Sell the rights: You can sell your Bezugsrechte on the stock exchange during the designated Bezugsfrist. The proceeds from the sale can help compensate for the theoretical decrease in the value of your existing Aktie due to the capital increase.
* Let the rights expire: If you neither exercise nor sell your rights, they will expire worthless at the end of the subscription period, leading to a dilution of your ownership and a loss of the inherent value of the rights.

3. Can I buy more new shar³es than my Bezugsrecht entitles me to?

In some rights offerings, companies may include an "oversubscription privilege" or "secondary subscription" option. This allows shareholders who have fully exercised their primary Bezugsrecht to apply for additional unsubscribed shares if available. This option is not always offered and depends on the terms of the specific offering.

4. How does a Bezugsrecht affect my existing shares?

On the "ex-rights" date, the market Kurs of your existing shares will theoretically decrease by the calculated value of one Bezugsrecht. This is because the value of the right to subscribe to cheaper new shares is effectively detached from the old share. However, if you exercise or sell your rights, your overall wealth (value of existing shares plus value from rights) should theoretically remain unchanged, assuming an efficient market. This simply represents a reallo¹, ²cation of your Vermögen.