Public issue of capital in traded companies: the failure case of Abengoa in 2015.

Abstract

In this end-of degree project we will study the dynamics of a capital increase (issue of capital) of a listed company, from a financial point of view and explaining all the milestones that must be carried for the operation to be successful. The capital increases of listed companies, as we will see later, have special features that make them special. This is so, firstly, because both old and new shares are subject to quotation in regulated markets and, secondly, these companies are of an important size, so the issue will normally be of millions of euros. There are basically three types of capital increases in listed companies, depending on the advisory modality of the investment banks responsible of the operation: 1- Firm Commitment Underwriting. In this case, the Investment Bank acquires all or part of an issuance of securities immediately for the purpose of placing them among the investors. The underwriter assumes the maximum risk here; and it is the insurance modality that most favors the issuer. 2- Stand By Underwriting Letter. The Investment Bank commits to buy the shares or rights issued that it has not been able to place or sell to investors or public within the stipulated period from the issuance. 3- Best Efforts Underwriting. The Investment Bank commits only to sell the securities or rights that it can place in the market, after having made its best efforts in this sense. Thus, if there are any shares of rights remaining after the date limit, there is no obligation of the entity to proceed with its purchase. The risk, then, is assumed completely by the issuer.

Among these modalities we are going to study the second one, Stand By Underwriting Letter, which is the most common in the market and the risk in the operation are well balanced between the issuer and the Investment Bank.