Capital Increase on the Stock Exchange: How Corporate Financing Works after the IPO

The broader public often perceives the initial public offering (IPO) as a one-time milestone and the zenith in a company’s life cycle. The true strength of a listing, however, lies in its lasting connection to the capital market. In this way, a listed company can repeatedly raise equity capital in order to enable growth, finance acquisitions, or to bolster its balance sheet as needed. The so-called capital increase provides the company with the flexibility required to implement its business strategies and strengthens its financial resilience.

Overall, 2025 was characterized by a cautious but structurally sound upswing on the capital markets: In 2025 listed companies in Switzerland raised roughly 2.7 billion Swiss francs via capital increases on the equities market. This corresponds to a 15.6% increase compared with 2024. In Spain, listed companies increased their capital by 10.9 billion euro. That’s roughly 79.7% more than the year before.

At the same time, the global IPO environment was characterized by selective growth: According to figures from EY, there were 1,259 IPOs worldwide in 2025, slightly more than in the previous year. Issue volume, however, increased significantly by 32% to 163.3 billion USD. This indicates that markets tend to attract larger, better prepared issuers. 

A capital increase involves a listed company increasing its equity capital by issuing new shares in return for investment (actual capital increase) or converting reserves into joint stock by increasing the nominal value of existing shares, or by issuing bonus shares (nominal capital increase).

In practice, the issuing of additional shares is usually the primary focus; in doing so, total equity increases. In the case of nominal capital increase, the change primarily involves the structure of the equity capital, without any new capital flowing in.

In practice, listed companies decide on a capital increase based on a number of reasons:

• Growth, Capex, and internationalization: Companies finance investments in new markets, production capacities, or technology when these projects can’t be reasonably covered by additional debt.
• M&A and acquisition currency: Equities can be utilized as an acquisition currency or for the financing of acquisitions. A solid equity base increases strategic ability to act.
• Balance sheet strengthening and resilience: Increasing equity capital improves key figures such as equity ratio or debt level and can improve the credit profile with respect to banks and bond investors. 
• Free float and liquidity: A larger number of freely tradable shares can lead to higher trading volumes and better investability, which is particularly relevant for institutional investors.
• Strategic transformation: In the case of realignments, for example the set up of new business areas or the retreat from non-strategic areas, additional equity capital creates latitude for changes.

Capital increases have a direct impact on existing shareholders, and their initial reaction to them is often negative. Since more shares are being issued, they fear a dilution of their existing ownership stake and thus their profits too. But if the capital raised is directed toward viable projects, attractive acquisitions, or substantial balance sheet improvement, the move can have a positive effect on company value, and consequently share value, over the medium term.  

For existing shareholders, a capital increase is neither positive nor negative per se. It’s much more important what the capital is used for and under what conditions the transaction takes place. Subscription rights offer them an alternative. They can maintain their ownership stake by exercising their subscription rights or divest themselves, thus economically offsetting a dilution.

For both sides – issuers and investors – transparency and market mechanics are thus key: Ad-hoc publicity, structured trading through subscription rights and separate trading lines as well as pricing in the order book help reduce information asymmetries and make the transaction transparent.

In practice, there are three types of capital increase outlined in the Swiss Code of Obligations. In essence, under Swiss law, there’s an important role played by the ordinary capital increase, conditional capital increase, and the capital band: 

The ordinary capital increase refers to the “classic” way via a general meeting resolution, which is entered in the commercial register.

In a conditional capital increase, the equity capital increases only if certain conditions are met. This allows creditors to exercise their conversion and options rights and convert them into shares. The corresponding rights are entrenched in the articles of association, and the shareholders waive their subscription rights to this extent in favor of the beneficiaries.

With the capital band, a flexible instrument for greater agility was introduced as part of the 2023 revision of corporate law governing joint-stock companies. In doing so, the general meeting authorizes the board of directors to increase or reduce the joint stock within a defined capital band for a period of up to five years.

Prior to the 2023 revision, the only available option was an approved capital increase. The capital band provides additional, two-sided flexibility: Companies can now respond more quickly to market opportunities or changing conditions without having to convene a new general meeting for each adjustment.

The stock exchange and its market infrastructure support a transparent, orderly execution of capital increases. In the course of this, for investors it’s particularly relevant how subscription rights as well as new and existing shares are handled during the transaction.

In capital increases involving a rights issue, existing shareholders receive subscription rights proportional to their previous equity interest. The aim is to protect the previous ownership interest and to avoid dilution, provided that the shareholders exercise their subscription rights. They have a variety of options:

• They can exercise their subscription rights and subscribe for new shares.
• They can sell their subscription rights on the exchange during the subscription period, and thus realize part of their economic value.
• They can waive their subscription rights and let them lapse.

Legally, subscription rights are highly protected: In Switzerland, a company can suspend or restrict them only for important reasons such as in the context of acquisitions, strategic investments, or employee participation programs. In all cases, it is essential that existing shareholders are aware of the deadlines and conditions of a capital increase.

In practice, the subscription price is typically lower than the current market price in order to make participation attractive; in exceptional cases, however, the price may also be set close to the market price. In addition, there are capital increases through bonus shares: Companies issue new shares to existing shareholders from their reserves – without any fresh capital flowing in, but with a reallocation within their equity capital.

Accelerated bookbuilding (ABB) involves issuers placing large volumes with selected institutional investors within a short period of time – often overnight. The emphasis is on speed and planning security; a subscription right is seldom provided.

In a private placement, a company issues shares in a targeted manner. From a company’s perspective, a private placement is a flexible tool used to raise capital while also selecting a strategic partner. Existing shareholders are particularly interested in knowing whether and how their subscription rights are ensured, or how they will be compensated.

For certain transactions, an exchange can open separate trading lines. In such cases, existing and new shares are temporarily traded under different security identification numbers, for example if new shares are already listed but not yet deliverable, or when there is a difference in the rights associated with the two lines.

This “when-issued” logic creates transparency regarding pricing in a transitional phase. It allows investors to make targeted decisions about which line best meets their investment goals, while also ensuring that market pricing remains transparent. For the stock exchange, this is an important element in ensuring orderly trading, even when complex capital market transactions are involved.

While a capital increase works to increase the company’s equity capital, a capital reduction has the opposite effect: The company reduces its share capital either nominally through a balance sheet adjustment, or in real terms via capital repayment.

For shareholders, a capital repayment is not automatically a negative sign. It can signal solid excess liquidity and a lack of meaningful investment options – or part of a restructuring if the company wants to offset previous losses. The context is thus crucial: Why is the company returning capital, and how does this affect future profitability?

Under Swiss law, a capital reduction is possible only if it has been approved as a formal resolution of the general meeting, and is subject to strict creditor protection rules.

On the stock exchange side, a capital reduction follows a clearly regulated process: Capital reductions are announced – deadlines apply, and there are sometimes separate trading lines – and the transaction is legally complete only once it has been entered in the commercial register. It’s therefore worthwhile for investors to take a close look at purpose, structure, and timing – and particularly at whether the case involves a genuine repayment of capital, or whether it’s primarily a balance sheet adjustment.