Markets
France: OCABSA, PACEO and the AMF findings
A company on Euronext Paris or Euronext Growth can issue an OCABSA, a convertible with attached warrants repriced at each conversion, or run a PACEO, the French standby equity line. Since the law of 13 June 2024 the board may fix the price freely on delegation for a public offer made without subscription rights. The AMF's study of 69 users is the counterweight.
Key takeaways
- The AMF counted the damage. In a study published on 13 October 2022 of 69 companies using OCABSA or equity-line financing, 57 — 83% — recorded a share-price fall, the average decline was 72%, and 29% fell by more than 90%.
- Complaints drove the study. The AMF received more than 250 complaints in 2021, up 232% on 2020, and asked shareholders to watch the resolutions that waive preferential subscription rights.
- Pricing was liberalised in 2024. Under Article L.22-10-52 of the Code de commerce the issue price of a public offer without preferential rights may, on delegation from the extraordinary general meeting, be freely fixed by the board, against a supplementary report certified by the statutory auditor.
- The board-designation route keeps an explicit floor. Article R.22-10-32 requires the price to be at least the closing price of the last session preceding the board's decision, reduced by a maximum discount of 10%.
- Two 30% ceilings, both annual. Reserved increases with beneficiaries designated by the board are capped at 30% of share capital a year, and private-placement capacity under Article L.411-2 was raised to the same figure.
What the AMF found, and why it comes first
France is a permissive market for this structure in the legal sense, and a market whose regulator has documented what it did to the issuers that used it. On 13 October 2022 the AMF published a study of 69 companies financed through OCABSA or an equity line. Fifty-seven, 83% of the sample, saw the share price fall; the average decline was 72%; 29% fell by more than 90%; 17% rose. The regulator urged issuers and their directors to be particularly vigilant before resorting to this financing, and asked shareholders to watch the resolutions waiving their subscription rights.
That is not a reason to leave France out of the directory. It is a reason to read the mechanics below as what is possible rather than what is advisable, and to treat the arithmetic on dilution and conversion mechanics as the first document a French board asks for.
The local instruments, in their own vocabulary
France is one of very few markets with settled local names for this financing. An OCABSA — obligation convertible en actions avec bons de souscription d'actions — is a convertible bond with attached warrants, drawn in tranches, converting at a price set against recent VWAP at a discount. A PACEO — programme d'augmentation de capital par exercice d'options, usually called an equity line — is the French standby equity facility: an investor subscribes for new shares on the company's demand, over time, at a market-referenced price. Both are common on Euronext Growth Paris. The AMF's own term for the category, financements dilutifs, tells you how it is regarded.
Two pricing routes, since the loi Attractivité
Article 9 of loi n° 2024-537 of 13 June 2024, the law on business financing and French attractiveness, rewrote the pricing regime, and its pricing provision took effect three months after promulgation. The result is that price is now set by which route the general meeting used, not by one universal formula.
| Route | How the price is set | Annual capacity |
|---|---|---|
| Public offer without DPS (L.22-10-52) | Freely fixed by the board on delegation from the extraordinary meeting, with a supplementary report certified by the auditor | As voted in the delegation |
| Reserved increase, beneficiaries named by the board (L.22-10-52-1) | R.22-10-32: at least the last closing price, less a maximum 10% discount | 30% of share capital |
| Private placement (L.411-2 C. mon. fin.) | Under the terms of the delegation | 30% of share capital |
| Any route | Never below nominal value or accountable par | — |
| Summary of the statutory position only. The wording actually voted by the meeting governs. | ||
One point is deliberately left open. Article R.22-10-32 addresses itself to the third paragraph of L.22-10-52-1 — the route where the board designates the beneficiaries. A reserved increase in which the extraordinary meeting itself names the beneficiary is a different provision, and whether the 10% floor reaches it is a question for French counsel. No structure should be priced on an assumption about it.
Capacity, the nominal-value floor and dealing
Capacity in France is a calendar problem. The delegations are voted annually and the 30% ceilings are expressed per year, so a two-year facility spans at least two votes. Beneath that sits the European floor: under Article 47 of Directive (EU) 2017/1132 shares may not be issued below nominal value or accountable par, so an issuer whose valeur nominale sits near the market price reduces it before signing, as on the German page.
After issue there is no French holding period. Conversion and warrant shares are admitted and trade with the existing line, which is the whole difference from the US route set out on Rule 144 and restricted securities and on resale registration. The remaining gate is the prospectus threshold for a follow-on admission of a fungible class, loosened by the EU Listing Act.
General information, not legal advice. The Code de commerce articles were read in their current consolidated form, and the AMF figures come from the AMF's own release on its October 2022 study. The interaction between the two 30% ceilings, and the pricing of an increase reserved by the meeting itself, are unresolved here. Take advice from qualified French counsel.
Send the delegations voted at the last extraordinary meeting, their expiry and the nominal value, and we will tell you what fits inside them.
Sources
- Code de commerce, Article L.22-10-52
- Code de commerce, Article L.22-10-52-1
- Code de commerce, Article R.22-10-32
- Loi n° 2024-537 of 13 June 2024, article 9
- AMF — study on companies using dilutive OCABSA and equity-line financing
Financing a French listed issuer: frequently asked questions
Is a floating conversion price lawful in France?
Yes. Neither the Code de commerce nor the AMF prohibits a conversion price fixed against recent market prices, and the OCABSA is built on exactly that. What changed in 2024 is the pricing of the underlying capital increase: on delegation from the extraordinary general meeting, the board may now freely fix the issue price of a public offer made without preferential subscription rights.
What is the maximum discount on a French reserved capital increase?
It depends on the route. Where the extraordinary general meeting delegates to the board the power to designate the beneficiaries by name, Article R.22-10-32 requires the issue price to be at least the closing price of the last trading session preceding the board's decision, which may be reduced by a maximum discount of 10%. Other routes are priced under their own provisions.
What did the AMF find about companies that used this financing?
In a study published on 13 October 2022 covering 69 companies that had used OCABSA or equity-line financing, 57 of them, or 83%, saw their share price fall. The average decline was 72%, 29% fell by more than 90%, and 17% rose. The AMF received more than 250 complaints in 2021, an increase of 232% on 2020.
How much can a French issuer place without going back to shareholders?
Capacity comes from the delegations voted at the extraordinary general meeting. Two ceilings set by the law of 13 June 2024 are 30% of share capital a year for a private placement under Article L.411-2 of the Code monetaire et financier, and 30% a year where the meeting delegates the designation of named beneficiaries. Both are annual, and both expire.
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Which delegation is the raise going to use?
Article L.22-10-52-1 caps a reserved increase at 30% of share capital a year, and where the board names the beneficiaries Article R.22-10-32 floors the price at the last closing price less a maximum 10% discount. Send the resolutions and the valeur nominale.