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Issue of shares (Part - 2) Video Lecture - Commerce
FAQs on Issue of shares (Part - 2) Video Lecture - Commerce
| 1. What is the process of issuing shares? |  |
Ans. The process of issuing shares involves several steps. Firstly, the company must determine the number of shares it wants to issue and the price at which they will be offered. Then, the company needs to prepare a prospectus that provides detailed information about the shares, including the company's financial position, business operations, and future plans. After obtaining approval from the regulatory authorities, the company can start offering the shares to the public through various channels such as initial public offerings (IPOs) or private placements.
| 2. What is the difference between an IPO and a private placement in share issuance? | |
Ans. An IPO (initial public offering) is a process in which a company offers its shares to the general public for the first time. It involves listing the shares on a stock exchange, allowing anyone to buy or sell the shares freely. On the other hand, a private placement is a method of issuing shares to a select group of investors, such as institutional investors or high-net-worth individuals, without making them available to the general public. Private placements are typically conducted through negotiations and are subject to fewer regulatory requirements compared to IPOs.
| 3. What are the advantages of issuing shares? | |
Ans. Issuing shares can provide several advantages to a company. Firstly, it allows the company to raise capital for expansion, research and development, or other business activities. Secondly, it can enhance the company's credibility and visibility in the market, attracting potential investors and partners. Moreover, issuing shares can increase the liquidity of existing shareholders' investments by providing a market for buying and selling shares. Additionally, it can be a way for the company's founders or early investors to monetize their investments and realize profits.
| 4. What are the risks associated with issuing shares? | |
Ans. Issuing shares also comes with certain risks. One of the main risks is dilution, where the ownership percentage of existing shareholders decreases as new shares are issued. This can lead to a loss of control for existing shareholders and a decrease in their voting power. Additionally, if the market conditions are unfavorable, the company may not be able to sell all the shares at the desired price, resulting in lower capital raised than anticipated. Moreover, the company may face increased scrutiny and disclosure requirements as a publicly traded entity, which can add administrative and regulatory burdens.
| 5. How are the proceeds from share issuance typically utilized by companies? | |
Ans. The utilization of proceeds from share issuance depends on the specific needs and plans of the company. Generally, the funds raised through share issuance can be used for various purposes, including financing expansion projects, acquiring new assets or businesses, repaying debts, investing in research and development, marketing and advertising activities, and working capital requirements. The company's management will decide on the allocation of funds based on the company's strategic priorities and growth objectives.
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Nov 16, 2024 Last updated |
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