What is paid-in capital increase? What is the free capital increase?

In this article, I will discuss the concepts of capital increase and capital increase, which are very important for stock investments . You can make more successful investments by learning these issues that must be followed in stock investments. 

The investor, who holds shares, is a partner of the company or companies to which the shares belong. There is an increase or decrease in the value of the shares in relation to the financial position of the companies. At the same time, with the distribution of annual profits in the form of dividend income, the investor obtains the profit income in his share. Many factors should be evaluated and followed in investments in stocks. One of the important points to be considered is that companies  perform capital increase with price or capital increase  with bonus . Now let’s examine these concepts more closely.

WHAT IS PRICE CAPITAL INCREASE?

Companies sometimes want to increase their capital. One of the most important ways in capital increase is the capital increase with value . The company realizes the paid-in capital increase and introduces new shares to the market. New shares that are placed on the market are purchased by investors and thus the company obtains external financing. In other words, the company increases its capital.

Priority is given to the existing shareholders in the purchase of new shares. This priority is called priority. Pre-emptive investors may purchase new shares at a fixed rate determined by the company based on their existing shares. Restriction of the pre-emptive right and giving priority to investors who do not hold the company’s shares take place during the public offering. 

ADVANTAGES OF PRICE CAPITAL INCREASE

The paid capital increase brings many advantages. Let’s explain these advantages ingredient by item.

  • The most important advantage for companies is to meet the required financing.
  • Companies expand their equity capital.
  • Changes in stock prices are experienced.
  • Makes it easier for companies to make new investments.
What is paid-in capital increase?  What is the free capital increase?

WHAT IS THE FREE CAPITAL INCREASE?

A paid-in capital increase is a paid-in capital increase by a company using the resources available to it. No external financing is provided during this process. Due to the transfer of equity to paid-in capital, the company does not generate additional income. At the same time the total value of the company remains constant. The value of the shares is adjusted as soon as the free capital increase is made in order to keep the company value constant . In other words, stock prices are reduced to a certain level.A free capital increase is the distribution of new shares to existing shareholders without waiting for any provision. This distribution takes place at a certain rate per share. Thus, investors increase their stocks without paying any fee. Although the number of shares increases, investors cannot make financial gains as a result of the prices reduced by the company. However, in the long term, the stock prices have reached their previous levels and the investors have gained profits.

ADVANTAGES OF FREE CAPITAL INCREASE

The free capital increase brings some advantages. Take these advantages.

  • The flowability and activity of stocks are increased.
  • Demand for corporate securities increases in the market.
  • Investors wishing to increase the number of securities in their hands make large-scale purchases and increase the stock value.