(News Bulletin 247) – The Financial Markets Authority has issued a new warning against dilutive financing transactions. Out of 69 companies that have used such instruments, it notes an average fall in the share price of 72% since the implementation of the first operation.

The Financial Markets Authority (AMF) on Tuesday recommended that companies better inform investors when they resort to financing operations that dilute the shareholding, the implementation of which can lead to massive falls in share prices.

To obtain fresh money, “some listed companies resort to financing consisting of capital increases paid up in several installments and spread over time” and which is done via “an intermediary who is not intended to remain a long-term shareholder “of the company, explains the policeman of the French financial markets in a press release.

However, these operations can considerably reduce the weight of existing shareholders.

Navya’s example

The AMF studied 69 companies that used this type of practice between 2019 and 2021: 57 saw their prices fall, a drop of 72% on average since their first financing operation. The institution has also recorded more than 500 reports and complaints from retail investors over the past two years.

This is for example the case of the company Navya, a specialist in autonomous driving technology, currently placed in receivership, and whose share price has fallen in two years from four euros to three cents after several emissions. bonds convertible into shares.

This is why the AMF recommends that companies specify in the “heading of their financial communication” that this type of operation can “create strong downward pressure on the share price” and that market players “are invited to be very vigilant before making the decision to invest”.

This request now appears in the guide to preparing prospectuses and the information to be provided in the event of a public offer or admission of financial securities published by the AMF.

The AMF had already warned on several occasions in recent years against the risk associated with such mechanisms.

(With AFP)