It is the excess over the nominal value at which new shares are issued to compensate for the higher value of the existing shares and capitalize the company. As there is a preferential subscription right for existing shareholders, they can always sell their rights to new shareholders and offset the effect of the higher value of the existing shares if they are issued with a low or no premium. In the United States, the issuance price is determined directly in absolute values, i.e. in dollars, as the shares do not have nominal value or have it but it is merely symbolic. The subscription right in Spain constitutes the right of the old shares to subscribe to new shares. This right has a political value (maintaining participation) and an economic value, equivalent to the loss of value of the old share when new shares are issued at a lower price than they were trading at and adjusted to the proportion of the capital increase. The amount of the right is not considered income or capital gain but a lower purchase price of the old shares.
« Back to Glossary IndexPremium on new issue
« Back to Glossary Index