Term · Capital Measures & Financing
Contingent capital
In briefContingent capital is a capital framework reserved for specific purposes, such as convertible bonds, option programmes or mergers. For small caps it is an early indication of later dilution through conversion or option rights.
Definition
Capital framework designated for specific purposes such as convertible bonds, option programmes or mergers.
How it is calculated
Formula. Analysis: contingent capital ÷ current share capital.
Why it matters for small caps
In the small-cap space, contingent capital is an early indicator of future dilution from conversion or option instruments.
Common misreadings
- It often becomes relevant only when instruments are exercised; but the framework exists beforehand and belongs in the dilution analysis.
In the process
Frequently asked
What is contingent capital?
It is a pre-approved capital framework for defined purposes. Shares from it arise only when, for example, conversion or option rights are exercised.
How do you assess contingent capital?
You relate it to the current share capital. This allows you to estimate the possible extent of future dilution.
Why does contingent capital belong in the dilution analysis?
The framework exists already, before instruments are exercised. Anyone ignoring it underestimates the potential dilution.
Related terms
Sources
Primary
Bundesministerium der Justiz – Aktiengesetz (AktG)
https://www.gesetze-im-internet.de/aktg/
https://www.gesetze-im-internet.de/aktg/
Methodology
IFRS Foundation – IAS 33 Earnings per Share
https://www.ifrs.org/issued-standards/list-of-standards/ias-33-earnings-per-share/
https://www.ifrs.org/issued-standards/list-of-standards/ias-33-earnings-per-share/
Education only, not investment advice. Ranges and thresholds are didactic orientation values, not an official standard.