The meaning of issue premium is the premium to be paid for a share in relation to its nominal value. This premium is valued when a company already created chooses to make a capital increase favoring the entry of new partners into the company. This therefore implies that new shares are put up for sale to increase the business.
Those in charge of setting the price of participations They will be the initial investors, who can choose between setting a price equal to the nominal value, at which they paid in their day, or otherwise establishing a surcharge or premium for each share. This money that would be paid more is what is called the issue premium
The purpose of the share premium concept is to protect the old shareholders against the new ones who are joining. The former have developed more important investments and have been generating a client portfolio, among other things.
The creation of the company Reserves have been generated with a value that remains fixed regardless of whether or not the number of shares increases. The capital increase with issue premium makes the new shareholders pay more for the shares to avoid a reduction in the value of the shares. actions or a dilution effect.
How to calculate the share premium?
The issue premium is about measuring the difference between the price established for the new shares and the nominal value. The formula for the issue value of a share (PE) will be equal to the issue value of each share (EV) subtracting the nominal value (NP)
PE = AND-NE
An example of an issue premium is when new partners pay 20 euros for each share, when they had a nominal value of 15 euros. In this case, the share premium would be 5 euros.