A capital increase is the issuance of new shares by a company to finance new investments, acquisitions, or to help rebalance its financial structure. This can have a negative effect on current shareholders, as it often causes stock dilution, meaning each existing stock represents a lower percentage of ownership, making the shares less valuable. An increase in total share capital that appears on a company's balance sheet is usually bad news for shareholders as it represents the issuance of additional shares, which dilute the value of investors' existing shares. In contrast to a capitalist economy, a socialist economy would not base production on the accumulation of capital, but rather on the criteria of satisfying human needs and directly producing use values. Accumulation can be measured as the monetary value of investments, the amount of income that is reinvested, or as the change in the value of the assets held (the increase in the value of the share capital).
The company's capital increase obtained through the sale of additional shares can finance additional company growth. The concentration and centralization of capital are two of the results of this accumulation. A crisis of capital overaccumulation occurs when the rate of profit is higher than the rate of new profitable investment outflows in the economy, as a result of the increase in productivity derived from a growing organic composition of capital (greater ratio between capital inputs and labor). The smallest capitals, therefore, are grouped into spheres of production that modern industry has only achieved sporadically or incompletely. A smarter and more productive organization of production can also increase production without increasing capital. Despite possible dilution of shares, increases in share capital can ultimately be beneficial to investors.
Ernest Mandel emphasized that the rate of accumulation and growth of capital was largely dependent on the division of the social product of a society between the necessary product and the surplus product and the division of the surplus product between investment and consumption. The objective of capital accumulation is to create new fixed and active capital, to expand and modernize existing ones, to increase the material base of socio-cultural activities and to constitute the necessary resource for reserve and insurance. Capital relations assume their most externalized and fetishistic form in interest-earning capital. The growth rate of these expenditures determines the long-term rate of capital accumulation and product growth. In addition, it will be remembered that, with the development of the capitalist mode of production, the minimum amount of individual capital needed to carry out an enterprise under normal conditions increases.
