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A company has published shareholder meeting decisions: https://cns.omxgroup.com/cdsPublic/viewDisclosure.action?disclosureId=884745&messageId=1113616

Currently there are 40 794 850 shares with nominal value 0.1 EUR (making total share capital of 4 079 485 EUR) and market value (at the time of the meeting) around 0.12 EUR.

The meeting decided:

  • Bump the nominal value to 1 EUR and exchange the shares 10:1 (10 existing shares becomes 1 new share). [number of shares becomes about 4 079 490]
  • Decrease the share capital by reducing nominal value to 0.1 EUR and paying out 0.9 EUR per share.
  • Issue 50 000 000 new shares (nominal value 0.1 EUR). Existing shareholders have preferrential rights to buy the new shares.

In the end there will be 54 079 490 shares and the share capital of 5 407 949. Thus the share capital is increased by 1.4 million euros and that's about all that changes. They will effectively have rebought 90% of the shares and issue even (a little bit) more new shares. The same outcome could seemingly been achieved by simply issuing 14 million new shares.

What could be the purpose of these actions? Is this a cash-out method or the other way around - a way to increase equity for some? Is that common or is this suspicious?

Update

The trading is currently suspended. I don't see any announcement about that, so no idea if it's because of these actions or something unrelated.

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  • This looks like existing shareholders get screwed. 1000 shares currently is worth 120 EUR. After these actions, they become 90 EUR cash and 100 shares. These shares won't be worth 0.3 EUR each when new ones are offered at 0.1 EUR. Perhaps the same 20% premium can be maintained. Then 120 EUR of value drops to 102 EUR. The big difference between this and repurchase, is that repurchase would have to beat the 0.12 EUR share price, and this plan pays out based on the 0.10 EUR nominal value.
    – Ben Voigt
    Apr 28 '19 at 15:17
  • (Note the above is a comment not an answer, because I have not even tried to address the question of "intention" and "purpose", only looked at the effects)
    – Ben Voigt
    Apr 28 '19 at 15:17
  • @BenVoigt a detail that I failed to include is that the existing shareholders have preferential rights to buy the new shares. So that shareholder could instantly exchange the 90 EUR back to 900 shares (or even subscribe to a bit more - proportionally to amount of shares owned). And the existing shareholders might buy out all of the new shares so there might be no 0.1 EUR shares available on the market at any moment.
    – Džuris
    Apr 28 '19 at 15:39
  • Ah well, I have to change my conclusion to "Existing shareholders get ripped off if they don't reinvest the dividend by exchanging it into the new shares" Feel bad for anyone with a buy+hold approach, since just keeping their investment now requires actively interacting with it, and buy+hold investors may not even be aware of the upcoming funny business.
    – Ben Voigt
    Apr 28 '19 at 15:41
  • Also, I assume this payout is a taxable event?
    – Ben Voigt
    Apr 28 '19 at 15:43

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