Difference between paid-in capital increase and free capital increase

 

📈 Do you know the difference between paid-in capital increase and free capital increase? 🎯

Capital increase refers to the process by which a company issues shares to expand its capital. At this time, there is a difference in the method of issuing stocks for paid-in capital increase and free capital increase. A paid-in capital increase expands capital by selling stocks to shareholders, while a free capital increase expands capital by distributing stocks to shareholders for free. In this article, we will learn about the differences between paid-in capital increase and free capital increase.

🔍 Paid-in capital increase

A paid - in capital increase is a way for a company to expand its capital by selling shares to shareholders. Shareholders can make additional investments by purchasing shares issued by the company. At this time, the price of stocks is determined according to the market price, and companies raise capital by selling stocks. Paid-in capital increase increases a company's capital and helps strengthen its financial stability. Additionally, shareholders can participate in the company's growth through additional investments.

🎁 Free capital increase

Free capital increase is a way for a company to expand capital by distributing shares to shareholders for free. Shareholders will receive free shares in proportion to the shares they own. At this time, the stock price is distributed at the price set by the company, regardless of the market price. Bonus capital increases encourage additional investment from shareholders and help increase shareholders’ profits. Additionally, companies can gain the trust of shareholders by distributing stocks for free.

🤔 Difference between paid-in capital increase and free capital increase

The biggest difference between paid - in capital increase and free capital increase is the price of the stock and the investment method of shareholders. A rights issue raises capital by selling shares, while a bonus issue raises capital by distributing shares for free. In addition, in a paid-in capital increase, the stock price is determined based on the market price, but in a free capital increase, stocks are distributed at a price set by the company.

Additionally, since a paid - in capital increase is a form in which shareholders purchase shares when making additional investments, shareholders must bear the cost of the additional investment. On the other hand, in a free capital increase, stocks are distributed to shareholders for free, so there is no need to incur additional investment costs.

Additionally, while a rights issue increases a company's capital and helps strengthen its financial stability, it may dilute shareholders' holdings. On the other hand, a bonus capital increase can expand capital while maintaining shareholders' ownership ratio.

📚 Conclusion

There is a difference between paid - in capital increase and free capital increase in the way a company expands capital. A paid-in capital increase raises capital by selling shares and induces additional investment from shareholders. On the other hand, a bonus issue raises capital by distributing shares for free and increases shareholders' profits. The two methods differ in the price of the stock and the way shareholders invest, which affects the financial stability of the company and the shareholder holding ratio. Companies must choose an appropriate method between paid-in capital increase and free capital increase according to the situation to expand capital.