Increasing Authorized Capital Stock
I am just wondering what are the steps involved before a company can increase its authorized shares?

I am aware that the increase should be approved first by the company's board and majority (around 2/3) of the shareholders(?). Once there would be an increase, does this automatically mean current shareholdings are to be diluted?

On the other hand, I am thinking that dilution will happen only upon issuance of the new shares. Simply increasing the authorized shares would have no immediate effect (though it may imply future activity such as an SRO).

Perfect example would be DGTL. From the recent increase of its authorized shares from 9B to 25B, assuming all of these "new shares" will be issued (or in the actual case, be used as allotment for the conversion of the convertible bonds into commons), then this indeed will "super" dilute the stock. No wonder the minority holders are protesting.
to increase authorized stock, would require justification from sec and ratification of the BOD. the justification usually is asset infusion or merely a preparation for an investment. restructuring the unit value of the share - decrease in par is sometimes also a reason used for the increase, but necessarily changing value amongst stockholders.

it will not be a dilution unless converted to additional listing. the SROs usually provide rights to existing stockholders to participate in the capital raising activity of the company. and is the choice of the stockholder if he wants to infuse more money hence diluting his ownership if he opts not to.

The most important part of your trades and investments shall be ---- what you think of your money, and how the others think about theirs.

Forum Jump:

Users browsing this thread: 1 Guest(s)