What is a Share Swap?
Definition
- A share swap refers to an exchange of shares between companies
- For example: Company A issues new shares to Company B in exchange for shares in Company B
Impact on Capital
- Since new shares are issued, the company’s Paid-Up Capital will increase
Exchange Ratio
- Due to differences in company value, the exchange is usually not 1:1
- The ratio is determined based on the valuation of both companies
- For example: 2 shares for 1 share / 10 shares for 1 share are possible
Key Point
- Before carrying out a share swap, both companies must determine their respective values
- The exchange ratio is then decided based on this valuation