# Equity raising: rights issues, convertibles & block trades
On 16 September 2015, Glencore CFO Steven Kalmin and CEO Ivan Glasenberg priced a $2.5 billion equity placement at just a 3.4% discount to the previous close, and the stock *rose* the next day. Eleven months later, Air France-KLM priced a rights issue at a 40% discount to TERP, and watched its market cap evaporate further over the following weeks. Same instrument. Same European market. Opposite outcomes. The difference wasn't luck, it was choreography, signaling, and a CFO who understood that equity issuance is 20% mechanics and 80% market psychology.
For the modern CFO, equity raising is no longer a once-in-a-decade event. Between the post-COVID balance sheet repairs, the 2023-2025 rate-shock refinancings, and the AI-capexcapexCapital Expenditure (CapEx) is money spent to acquire, upgrade, or extend long-lived assets like equipment, property, or software that deliver value over multiple years.View full definition → arms race now reshaping 2026 capital plans, the equity capital markets toolkit has become a quarterly conversation. This lesson walks you through the three instruments you must master: rights issues, convertibles, and accelerated block trades (ABBs), when each works, how each is priced, and what separates a Glencore from an Air France.
Before discussing mechanics, understand the CFO's strategic choice. The decision tree pivots on three variables: size relative to market cap, urgency, and shareholder composition.
A rights issue offers existing shareholders the pre-emptive right to buy new shares pro-rata, typically at a discount to the current market price. In Europe and the UK, it remains the default for any raise exceeding roughly 20% of issued share capital, because regulators and institutional shareholders (notably the UK Pre-Emption Group, which tightened its guidance again in late 2024) insist on protecting existing holders from dilution.
The mechanics: you announce the issue, set a subscription price, calculate the theoretical ex-rights price (TERP), and trade "nil-paid rights" during a 2-4 week subscription period. Shareholders who don't want to participate sell their rights in the market, capturing the economic value of the discount and avoiding dilution.
Here's what most CFOs get wrong: the headline discount is not the dilution. What matters is the discount to TERP, not to the cum-rights price. Glencore's 2015 raise issued 1.3 billion new shares at 125p versus a 129p closing price, a tiny 3% discount to TERP. The market read this as confidence. Air France-KLM's April 2022 €2.26 billion rights issue, by contrast, priced at €1.17 versus a TERP of roughly €1.95, a 40% discount that screamed distress and triggered a further 15% slide post-announcement.
A convertible bond is debt that converts into equity at a pre-set strike price, typically 25-40% above the current share price. The CFO's appeal: you raise capital at a coupon dramatically below straight debt (sometimes zero, as MicroStrategy demonstrated repeatedly in 2024-2025 with multiple 0% coupon issues totaling over $7 billion), and you sell equity at a *premium* to today's price rather than a discount.
The 2026 convertible market is the hottest it's been since 2021. With investment-grade credit spreads still elevated post the 2024 rate normalization, and equity volatility making convertibles attractive to arbitrage funds, issuance hit $112 billion globally in 2025 per BofA data, and Q1 2026 is tracking ahead.
The catch: convertibles are contingent dilution. If your stock rallies through the strike, you've effectively sold equity cheap. Ask Carnival Corporation, which issued a $2 billion convertible at a 37.5% premium in April 2020 at $10 strike-equivalent, and watched the stock trade through $30 by 2021, leaving CFO David Bernstein managing a much larger dilution overhang than the headline suggested.
An ABB is an overnight block trade, typically used for stakes between 2% and 15% of market cap, where existing equity is sold (by a sponsor or treasury shares issued by the company) into the market via a single bank or syndicate, usually after market close, priced at a 3-7% discount to close, allocated by morning.
Speed is the entire value propositionvalue propositionA clear statement of the benefits your product delivers, the problems it solves and why customers should choose you over alternatives.View full definition →: zero market risk window, no prospectus (in most jurisdictions, under the EU Prospectus Regulation exemptions and US Rule 144A), no rights subscription period. The trade-off is size constraint and dilution to non-participating shareholders, which is why pre-emption waivers from shareholders matter enormously.
🎬 [VIDEO: "Inside an Accelerated Bookbuild - How Equity Capital Markets Desks Actually Price a Block" - https://www.youtube.com/results?search_query=accelerated+bookbuild+equity+capital+markets - A walkthrough from ECM bankers explaining the overnight pricing process, anchor investor dynamics, and how the wall-crossing process works in practice.]
Here is where executive judgment separates good CFOs from great ones. The pricing decision on a rights issue is a signaling exercise as much as a financing one.
In September 2015, Glencore was facing a commodity rout and a $30 billion debt pile. The stock had fallen 60% year-to-date. Conventional wisdom said: price the rights issue at a wide discount (20-30%) to ensure full take-up. Glasenberg and Kalmin did the opposite.
They priced at a 3.4% discount to the prior close, equivalent to roughly an 8% discount to TERP, on a fully underwritten basis with Citi and Morgan Stanley. They simultaneously announced a comprehensive debt reduction plan ($10 billion target), dividend suspension, and asset sales. The package said: *we don't need a deep discount because we're not desperate, and existing shareholders should follow their money in.*
Crucially, Glasenberg and senior management committed to taking up their full 22% allocation, a $550 million insider commitment. The deal was 2.5x covered. The stock closed up 7% the day after announcement.
Air France-KLM CFO Steven Zaat faced a different reality in April 2022: €4 billion of state aid to repay, the French government as 28% shareholder, and a fragile post-COVID recovery. The €2.26 billion rights issue priced at €1.17, a 40% discount to TERP.
Why the deep discount? Three reasons, all instructive:
1. No anchor commitment beyond the French state (29% of the raise), Air France-KLM couldn't demonstrate broad institutional support.
2. Underwriters demanded protection given balance sheet uncertainty.
3. The signal was that management itself was unsure of take-up.
The result: shares fell 16% on announcement and continued to slide. The raise succeeded mechanically (98% take-up), but destroyed roughly €600 million of equity value in the process. Zaat later acknowledged in investor calls that the structure was "the option available, not the option preferred."
The current market convention, refined by ECM desks at JPMorgan, Goldman, and BNP Paribas through the 2023-2025 cycle:
Knowledge check
1. In the Glencore $2.5bn equity placement of September 2015, what was the discount to the previous closing price, and what was the market's reaction the next trading day?
2. In Europe and the UK, above roughly what threshold of issued share capital does a rights issue typically become the default equity-raising instrument?
3. The theoretical ex-rights price (TERP) is best described as:
4. Select ALL correct answers about the CFO's three-instrument equity-raising decision framework as presented in the lesson.
Sélectionnez toutes les réponses correctes.
5. Select ALL correct answers about why equity raising has become a more frequent CFO conversation heading into 2026.
Sélectionnez toutes les réponses correctes.
The convertible bond market in 2026 deserves close attention because two structural changes have made it materially more attractive than it was pre-COVID.
Under OECD Pillar Two (now fully in force across the EU, UK, Japan, Korea, and most major jurisdictions), the 15% global minimum tax has compressed the value of interest deductibility for high-leverage structures. Convertibles, with their low coupons, are less affected, the implicit equity option value doesn't generate interest expense.
Simultaneously, under IFRS 16 and the IFRS amendments on financial instruments classification finalized in 2024, the bifurcation between liability and equity components on convertibles has been further clarified, making the EPS dilution math cleaner for IR teams to communicate.
The most important technique a 2026 CFO must understand is the capped call overlay, deployed in roughly 70% of US convertible issues over $500 million in 2025.
Here's how it works: alongside issuing the convertible, the company buys a call spread from the same banks. This synthetically raises the effective conversion price. Example: convertible struck at a 30% premium; capped call lifts the effective conversion to a 75% premium. The company pays an upfront premium (typically 8-12% of issue size) but materially reduces dilution if the stock rallies.
Spotify, under CFO Christian Luiga, executed exactly this in March 2025, a $1.5 billion convertible at 32.5% conversion premium with a capped call lifting effective dilution to 75% above the reference price. Cost: roughly $140 million in capped call premium. Benefit: avoided what would have been an additional 4 million shares of dilution as Spotify rallied 40% through year-end.
Convertibles are wrong when:
The accelerated bookbuild is the CFO's tactical weapon for opportunistic raises. The 2024 Siemens Energy €1.5 billion ABB, priced at a 4.7% discount with the trade fully covered in 90 minutes after market close, exemplifies modern execution.
Before launching an ABB, the lead banks "wall-cross" 8-15 large institutional investors under NDA, gauging price sensitivity and indication of interest. The CFO and IR head are typically on the calls. This is where deals are won or lost, if the wall-cross indicates soft demand at a 5% discount, you either widen the discount or pull the trade.
The 2024 changes to EU MAR (Market Abuse Regulation) guidance from ESMA on cleansing announcements have shortened the wall-cross window and tightened the rules on what investors can do post-cleansing. Your CFO playbook must include pre-cleared talking points and a clean information barrier protocol.
1. Never launch on a Friday. Settlement, T+2 dynamics, and the inability to follow up with investors over the weekend kill aftermarket performance.
2. Always have a price floor agreed with the board in advance. When markets move against you in the bookbuild, you need pre-authorization to pull rather than pricing wide in panic.
3. Lock up insiders for 90 days minimum. Markets punish any perception that management is exiting alongside the raise.
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