CAPITAL MARKETS | Consob issues a warning on convertible bonds risks

In a notice dated 7 July 2025, Consob warned investors of the significant risks associated with non-standard convertible bonds, instruments typically issued in favor of a single party, often used by companies facing severe financial and balance sheet stress as a last-resort means to raise financial resources.

According to data from 2022 onwards, these instruments have largely failed to prevent further deterioration of issuers’ financial conditions. In many cases, companies went on to face insolvency or liquidation. Meanwhile, shareholders suffered substantial losses and drastic equity dilution.

In light of these analyses, Consob urges current and prospective investors to be fully aware of these risks, particularly loss of invested capital, depreciation of the securities involved, and dilution of equity holdings.

The regulator also calls on corporate oversight bodies to maintain strict vigilance over the use of such instruments, ensuring that decisions are made through transparent processes that are aligned with the company’s long-term interests.

To reinforce investor protection, Consob has also issued a communication – updating and replacing the one from May 2023 – that strengthens disclosure and transparency standards for companies using these instruments, within the framework of existing regulations.

Newsletter n. 110 – August/September 2025