Glossary
- Safety cushion
- Sale in the open market
- Scale for bonds
- Scale for shares
- Schatz future
- SDAX
- Second Quotation Board
- Secondary market
- Secondary purchase
- Sector fund
- Sector index
- Securities
- Securities account
- Securities exchange
- Securities Trading Act
- Seed phase
- Semiannual report (funds)
- Sensitivity (warrants)
- Settlement
- Share
- Share buy-back
- Share price
- Share register
- Shareholder
- Shareholder rights
- Shareholder value
- Shareholders' record
- Shareholder’s right to information
- Sharpe-Ratio
- Shell corporation
- Short position
- Short sale
- SMAX
- SME Growth Market
- SPAC
- Special fund
- Specialised fund
- Specialized fund
- Spot market
- Spread
- Spread certificate
- Squeeze-out
- Standard deviation
- Startup company
- Startup phase
- Steady
- Stock corporation
- Stock cycle
- Stock exchange
- Stock Exchange Act (Börsengesetz)
- Stock exchange monopoly
- Stock index
- Stock market
- Stock market analysis
- Stock market crash
- Stock option
- Stock option plan
- Stock price
- Stock split
- Stop-buy order
- Stop-limit order
- Stop-loss limit
- Stop-loss order
- Stop-market order
- Stop-sell order
- STOXX Europe 50
- STOXX®
- Strike price
- Subscription
- Subscription period
- Subscription rights
- Support buying
- Support Line
- SWAP
- Switch
- Syndicate
- Syndicate bank
- Synthetic bonds
Subscription rights
Subscription rights enable shareholders to maintain a proportionate share of ownership in the company. On the first day that a subscription right is traded on the exchange, the calculated value of the subscription right is subtracted from the price of the existing shares. Although this results in a restructuring of shareholders' assets, the overall value of the assets does not change.
When the stock corporation law was liberalised, so-called - small stock corporations - were given the option of excluding the subscription right. This means that companies under a certain size are not obligated to grant subscription rights provided the capital increase does not exceed ten percent of the capital stock, or the offering price of the new shares is not substantially lower than that of the existing shares. The law thus guarantees that in such cases existing shareholders will continue to own more or less the same percentage the company's stock even without subscription rights, thereby ruling out a capital dilution.
Subscription rights are typically granted to shareholders in the event of a capital increase through contributions, a capital increase out of retained earning, or when the company issues either participation certificates or warrant-linked, convertible, or income bonds. The number of new shares to which each shareholder is entitled is expressed as the subscription ratio (i.e. the number of existing shares needed to acquire one new share). The subscription ratio reflects the extent of the capital increase, and is usually announced by the company's Executive Board.
Shareholders can either exercise their subscription right or sell it on the exchange during a subscription period of no less than two weeks that is to be announced by the Executive Board. Although the value of a subscription right can be calculated, once it has been admitted to trading on the exchange, its price is subject to the laws of supply and demand.
Example:
The share capital of a stock corporation is to be increased from euro 4 million to euro 6 million. The subscription ratio has been set at 2:1, which means that shareholders can subscribe to one new share for every two shares they own.
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