Germany's financial markets watchdog has initiated an initial investigation to scrutinize whether Bayer adequately disclosed its intentions to secure shareholder approval for a potential capital increase, according to a regulatory source. The inquiry, described as "routine," was prompted by a significant drop in Bayer's share price on the preceding Friday. The watchdog, BaFin, is currently assessing if further examination is warranted.
In response to heightened scrutiny, the healthcare and agriculture conglomerate announced its proposal to potentially augment outstanding shares by nearly 35% over the next three years, aimed at covering anticipated expenses from U.S. legal battles. This prospective capital infusion could amount to up to 8.4 billion euros ($9.1 billion) based on Friday's market valuation.
Following the disclosure, the company witnessed a steep 10% dip in its share price during intraday trading, as investors raised concerns about the magnitude of the capital increase and its impact on dividend distribution across a larger share base. Reuters reported that Bayer had earlier briefed several analysts in detail about the upcoming plans.
BaFin is now examining the implications of the proposed measure for the forthcoming annual investor meeting scheduled for April 25, as well as evaluating the extent to which the information was publicly disseminated to reach all relevant market participants.
Bafin stated that it routinely investigates unusual share price movements to ascertain potential market manipulation, insider trading, or breaches of ad-hoc disclosure regulations. In response, a Bayer spokesperson reiterated that the proposed capital increase aligns with past shareholder authorizations and existing capital reserves.
CEO Bill Anderson is earnestly working to rejuvenate Bayer's stock value amidst costly litigation, setbacks in drug development, challenging agricultural markets, and substantial debt amounting to over 32 billion euros.
In adherence to regulatory guidelines, listed companies like Bayer are mandated to broadly disclose information that could impact share prices to the widest possible audience on an equal basis.
Bayer's shares concluded the week 6.4% lower but rebounded slightly in subsequent trading sessions, displaying a modest 2% increase. Analysts, taken aback by the market response, cited executive assurances from Thursday that the capital increase was within standard practices.
In its formal announcement, included in an invitation to shareholders for the annual meeting, Bayer emphasized its commitment to resort to a rights issue solely if deemed absolutely necessary, ruling out its utilization for mergers or acquisitions.
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