A subscribed share is a type of share that has been acquired by a partner of a company and for which it has agreed to pay the corresponding economic amount within the agreed term and conditions.
The subscribed shares are ordinary shares characterized by the fact that their owner has not yet paid the amount corresponding to the value of the share. Thus, they have been delivered to the shareholder after signing a subscription contract. By means of this agreement, you undertake to comply with certain conditions within a specified period.
Characteristics of the subscribed share
The subscribed shares meet the following characteristics:
- They are owned by a certain shareholder.
- The amount agreed upon at the time of acquisition has not been paid.
- Its value may be equal to or greater than its nominal value.
- The owner acquires the status of shareholder.
- The shareholder has a contractual obligation to comply with the agreed conditions.
- They grant their owner the rights to participate in the general meeting of shareholders and to collect dividends.
Value of the subscribed share
The value of the subscribed share is set by the company at the time of issue. We can find shares subscribed for the same price as their nominal value, at par. On the contrary, there are shares subscribed for a price higher than their nominal value, in this case we would be facing a share with a premium, above par.
Once the shareholder has complied with its payment obligations and with the conditions agreed upon at the time of subscription of said share, it will have the value set by the market price. This market price will fluctuate depending on the situation of the company at all times, as well as the confidence of investors.
Example of the subscribed share
Suppose we are on the board of directors of a multinational company that manufactures household lighting items. After a meeting held to launch a new project related to lighting items for factories, we determined that the company needs to carry out a capital increase of 450 million dollars.
Said capital will be used to build a new manufacturing and assembly plant for the new product line. That is why we made an issue of shares worth $ 55 each.
The company enjoys great confidence from investors and we managed to subscribe 100% of the issue. The conditions agreed with the new shareholders are that they must pay the share price within a maximum period of three months. On that date the new project will be launched. In this way, the new investors will have acquired subscribed shares.
In conclusion, a subscribed share is an ordinary share for which the investor has not yet made the corresponding payment of the agreed value. Along with this, the new shareholder must comply with all the conditions and payment terms that have been stipulated in the sale contract.