Exploring the fundamentals of stock issuance in corporate finance, this overview discusses the differences between common and preferred shares, the decision-making framework for issuing stock, and the strategic significance of various stock types like IPOs, FPOs, and private placements. It also delves into the impact of corporate actions on stock issuance and the practical aspects of engaging with stock market issues.
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Initial Public Offering (IPO)
Companies offer shares to the public for the first time to raise funds
Follow-on Public Offers (FPOs)
Companies offer additional shares to the public in the secondary market
Private Placements
Companies sell stocks to a select group of investors, often institutional ones
Common Stock
Provides shareholders with ownership stakes, voting rights, and the possibility of receiving dividends
Preferred Stock
Offers fixed dividend payments and prioritizes investors over common stockholders for asset distribution in the event of company liquidation
Considerations such as capital requirements, market conditions, operational performance, and strategic objectives guide the decision to issue stock
Mergers
Combining equity may necessitate the release of new shares
Acquisitions
Acquiring a company may lead to the discontinuation of its stock issuance
Changes in Operations
Changes in a company's operations can impact its stock issuance practices
Understanding how corporate events interact with stock issuance is essential for a comprehensive grasp of corporate finance dynamics
Market Timing
The decision to issue stock is influenced by market conditions
Risk Management
Strategies like diversification can mitigate investment risks
Cumulative Preferred Stock
Offers fixed dividends and a higher claim on assets
Convertible Preferred Stock
Can be converted into common stock at a predetermined price
Participating Preferred Stock
Allows holders to receive additional dividends if the company's profits exceed a certain level
Callable Preferred Stock
Can be redeemed by the company at a predetermined price
The decision to issue stock raises ethical and governance issues that should be examined in business education
00
When a company sells shares for the first time to the public, it is known as an ______.
initial public offering
IPO
01
______ stock allows investors to receive dividends based on the company's profitability and provides them with ______.
Common
voting rights
02
In contrast to common stock, ______ stock usually grants fixed dividends and has ______ in asset distribution during company liquidation.
preferred
priority
