Subscription Rights

Definition

Subscription rights grant the stockholder the option of retaining the old share of capital stock when the company performs capital increases (against cash contributions and certain capital increases). They are implemented as a class in the system.

See also:

Creating a Subscription Right

Structure

You create a subscription right for a stock once in the system. You create it as a class (see below).

Integration

You only require subscription rights for an (ordinary) capital increase. You perform a capital increase in several steps, which are represented in the system as follows:

This graphic is explained in the accompanying text.

Overview: Capital Increase

You can use the following functions to perform the individual steps within this process:

Function	Prerequisites	Result
Post subscription rights ( (Corporate Action)	You must create the subscription right as a class. Create the position indicator for the subscription right.	The subscription rights that are issued from the old stocks are in the position. The old stocks position is written down by an amount equal to the accounting value of the subscription rights, and the subscription rights position is posted. See below.
Purchase/sell subscription rights, if required		The required number of subscription rights is in the position.
Exercising Subscription Rights ( (Exercising Security Rights)	You must create the new stock as a class. Create the position indicator for the new stock.	The new stocks are in the position.
Transfer new stock ((Corporate Action)		When you transfer the new stock, it is automatically assigned the ID number of the old stock. ⇒ New stock position.

Note Note

The total value of a securities account position does not change as a result of the capital increase. The subscription rights that result from the capital increase simply shift the proportional share value.

The value of the subscription right for accounting purposes differs from the theoretical value if the book value of the old stock is lower than its current market value. In this case, you have to determine the accounting value of the subscription right by matching its theoretical value to the book value of the old stock.

The book value of the old stocks is, on the one hand, reduced by the amount of the accounting value of the subscription rights, and on the other hand, the subscription right is posted to the position by the same amount. This means that the total value of the positions before and after the capital increase is the same.

The adjustment flows required for the book value markdown in the old stocks position are generated automatically.

End of the note.

Calculation of the theoretical and accounting values of the subscription right

This graphic is explained in the accompanying text.

Example:

Case a) Book value of the old stock <= Market value of the old stock
Book value of old stock	80 EUR
Market value - old stock	100 EUR
Purchase price - new stock	50 EUR
Dividend discrepancy - new stock	1 EUR
Subscription right ratio	1:1
Subscription ratio	1:1
Theoretical value of subscription right = (100 EUR - 50 EUR - 1 EUR) / (1 + 1) = 24.5 EUR
Accounting value = 24.50 EUR * (80 / 100) = 19.60 EUR
Case b) Book value of the old stock > Market value of the old stock
Book value of old stock	80 EUR
Market value - old stock	70 EUR
Purchase price - new stock	50 EUR
Dividend discrepancy - new stock	1 EUR
Subscription right ratio	1:1
Subscription ratio	1:1
Theoretical value of subscription right = (70 EUR - 50 EUR - 1 EUR) / (1 + 1) = 9.50 EUR
Accounting value = Theoretical value of subscription right = 9.50 EUR

See also:

Creating a Subscription Right