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ARTICLE · 27 MARCH 2023

Belgian Securities Regulator: Beware The Risks Of Certain Convertible Bonds

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The Belgian FSMA issued a warning on February 1, 2023, regarding dilutive instruments, such as certain types of convertible bonds and equity lines. In France, similarly, the financial regulator...

BelgiumFinance and Banking
Matthieu Duplat
Matthieu Duplat
Paul Van Hooghten
Paul Van Hooghten
Alicia Ghislain
Alicia Ghislain
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In Short

The Situation: Several Belgian-listed companies have turned to very dilutive instruments (e.g., certain types of convertible bonds and equity lines) as a source of financing, which raises risks for investors and the companies issuing these.

The Result: The Belgian Financial Services and Markets Authority ("FSMA") warns investors that such financial instruments can significantly negatively impact existing shareholders by way of dilution and negative pressure on the share price. It also emphasizes relevant company reporting obligations and directors' liability.

Looking Ahead: The risks of very dilutive financial instruments have caught the attention of financial regulators in Europe, who will likely continue to scrutinize these. Listed companies and their directors must exercise particular caution before issuing such dilutive financial instruments, including awareness of their obligations and potential liabilities in using such type of financing.

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