On May 5, Rareș Mihăilă, founder of investestelabursa.ro, held a webinar on Zoom for the 2Performant community, where we discussed what a capital increase means and how investors can generally benefit from these increases. The discussion lasted more than an hour and can be watched here. We were glad to have over 80 extremely active webinar participants interested in the subject.
If you haven’t been able to follow the discussion, we will offer a short review of the debated topics here.
The webinar started with a short definition of growth and value companies, the two types of companies that are generally listed on the stock exchange.
What do growth companies look like? 2Performant also falls into this category
• Companies that benefit from accelerated revenue growth
• They may have a higher debt ratio
• Do not distribute cash dividends
• It trades at higher multiples
• Business growth is often done through acquisitions
• Shares are usually more volatile
• Investments in such companies are considered riskier
What do value companies look like?
• Stable and mature business
• Constant growth of turnover from one year to another
• Stable dividend policy
• Low debt ratio
• Company that trades at attractive price multiples
• Solid business with a very good financial balance
Rareș then explained the process of a capital increase through cash contribution, step by step.
In short, in a capital increase, the company issues new shares that it will put up for sale, and by issuing these shares, the company receives a cash infusion.
Here is a simple definition of a capital increase:
• It involves the sale of new shares
• The company receives a cash infusion
• Shareholders who do not participate in the increase will see their stake diluted
When deciding to get involved in a capital increase, it is important to read the company’s prospectus and find out the objectives of the capital increase. And because Dorin Boerescu was present at the webinar, he told us how 2Performant wants to use the investment attracted following the capital increase.
“2Performant wants to attract 5 million lei through this capital increase, money that we will use to expand to other countries and consolidate our position in Romania. 2 million lei will be invested in strategic partnerships, 1.5 million in consolidating our position in Romania and Bulgaria, and 1.5 million for the development of a product that will help both affiliates and advertisers.”, said Dorin during the webinar.
The capital increase is a long process, carried out in stages, as follows:
- Convening the GMS – proposal for an increase
- Voting in the GMS
- Granting preference rights
- Preparation of a prospectus
- Prospectus approval by the FSA
- Trading of preference rights
- Subscription of new shares
- Unsubscribed shares will be offered for subscription in a private placement
We are currently between steps 4 and 5, awaiting approval by the FSA.
All 2Performant shareholders have received preference rights on April 8, 2021, which have the symbol 2PR01 and which can be used to buy new shares in 2Performant. A subscription of 5,68424 preference rights is required to subscribe for a newly issued share. The sale of new shares is done at issue price, which, in general, is higher per share than the nominal value and lower than the current stock price, to make the new shares more attractive. The difference between the issue price and the nominal value is the issue premium. The price of 2P shares will have a 25% discount, and the final price will be announced after the FSA approval.
The webinar ended with the answer to the main question of the meeting: How can I take advantage of capital increases?
1. Do you want to participate?
Buy the new shares at a discount
2. Don’t you want to participate?
Sell the rights and mark the profit
If you want to be up to date with the 2Performant capital increase and our evolution on the stock market, subscribe to the investor-dedicated newsletter that you can find here.