The shell value’s stock exchange listing generally represents decisive value for potential buyers. If the shell company is purchased, the company’s new owner can flexibly change the corporate purpose and incorporate its own future-oriented business potential into the company. This usually happens through two mechanisms:
1. Sale of the business/real estate/securities/etc. to be incorporated to the shell company
enterprise, or, alternatively.
2. Incorporation of the business (real estate/securities/etc.) into the shell company via a capital
increase through investments in kind.
The 1st option is unproblematic as long as the shell company enterprise pays an appropriate purchase price for the assets to be acquired. This should also be supported by a recognised auditor through a substance or capitalised earnings report. The 2nd option involves a series of formal requirements (detailed under “what are the different market sectors for shell companies?” depending on the market sector).
A valuation (expert report) must be submitted for the assets to be incorporated, and this valuation determines the value of the investment in kind. This value, together with an eventual cash capital increase, determines the value of the overall capital increase, and is placed in proportion to the shell company value produced from the stock exchange valuation. This ratio then determines the subscription right for the capital increase. A simplified example of this is given below:
The shell company has 1 000 000 outstanding ordinary shares at 1.00 Euro each. The stock price is 1.50 Euros, so the value of the company is currently 1.5 million Euros. The investment in kind has a value of 3.375 million Euros. The principal shareholder, who wants to incorporate the investment in kind, holds 75% of the shell company. The free float will produce a cash capital increase with a subscription right. Based on the valuation of the investment in kind, the cash share for 25% of the share capital (represented by the free float) is 1.125 million Euros, so the cash/real capital increase totals 4.5 million Euros, which produces a subscription ratio of 1 to 3 for 1 Euro. The new share capital then totals 5.50 Euros.
This simple calculation does not involve any possibilities like a premium or similar. It only represents the calculation of a capital increase.
The investment in kind (real capital increase) is generally accompanied by a cash component, so that the free float has the opportunity to make use of a subscription right to be guaranteed to it in order to not be diluted to the amount of its share (mixed cash and real capital increase). Of course, a real capital increase can also take place with a subscription right exemption, as long as this is in the articles of association (authorised capital affected by a subscription right exemption), or a shareholder meeting authorises a subscription right exemption. A real capital increase is generally decided on at a shareholder meeting, as it is usually more extensive from the value than a 50% capital increase in the existing share capital, which would be possible from the authorised capital with the consent of the supervisory board and without the shareholder meeting.
At the shareholder meeting which decides on the investment in kind, the buyer of the shell company generally also changes the articles of association, the company's registered base and name to reflect the name of its (area of) business, if necessary, in the name of the listed company. Our capital market experts are happy to advise you on all queries and subsequent action.