Is it bold or foolhardy? This question has probably been on the minds of Bayer's investors since the 5 March earnings report. At the late April Annual General Meeting approval will be sought for a cash call equivalent to 35% of its share capital. At the current share price that will mean around 8 billion euros. This is not only a huge chunk of money, but also unusual in size relative to share capital.

It looks like sheer courage born of desperation that is making Bayer to take this course of action. Although the Chairman of the Supervisory Board, Norbert Winkeljohann, confirms that he has sounded out important investors in advance, the shares are widely dispersed, and Bayer requires the approval of three quarters of shareholders. The only plus point is that the proxy advisors generally give their nod to a capital increase with subscription rights.

The Leverkusen-based company has manoeuvred itself into a dead end. It is difficult to rely on the goodwill of the shareholders. The brutal fall in the share price, the capping of the dividend to the statutory minimum for a period of at least three years, and the poor operating performance, have all contributed to this.

And even if it was a long time ago, Bayer did itself a disservice with its decision not to authorise the takeover of Monsanto at the Annual General Meeting, despite intensive requests from shareholders. Since 2018, the Leverkusen-based company has no longer had any anticipatory resolutions. Yet blanket authorisations for capital measures are part of the usual tools of a listed company.

The fact that Bayer is now requesting more capital at a time when the share price is close to a 20-year low speaks volumes. The reason for this is the never-ending wave of lawsuits in the USA. So far, 13.5 billion euros have been spent on the various legal cases, mainly brought by Monsanto. A further 6.5 billion euros have been set aside. In its latest earnings report, Bayer explicitly warns that the risk situation has worsened compared to the previous year. The reason for this is the increasing number of „pending legal proceedings“. The number of pending lawsuits in connection with the herbicide glyphosate alone has recently risen again to 67,000. Added to this is the complex of issues surrounding the chemical PCB.

It is therefore only sensible that Bayer is now finally trying to get the legal issues off the table – regardless of the question of guilt. The risks have been draining the cash flow for years and have restricted the operational room for manoeuvre. At the same time, the debt leverage is still so high that further borrowing is out of the question. Standard & Poor's, Moody's and Fitch rate the creditworthiness as Triple B, and Moody's has a negative outlook. A downgrade would further exacerbate the financial squeeze in the form of rising financing costs.

The crucial question from the shareholders' point of view is whether Bayer can use the money from a possible capital increase to resolve the tiresome legal issues once and for all. However, this is not clear from the information provided. Proceeds from capital measures are to be used exclusively to keep the balance sheet resilient during the settlement of the legal disputes. However, there is no mention of a final settlement – even though this would be the only way to achieve a price-boosting relief.

It is understandable that Bayer is being tight-lipped at this point. Discussing defence strategies and legal wrangling publicly is out of the question. However, whether the long-suffering shareholders are willing to fork out more money to come to terms with the past remains to be seen on 25 April.