ACCA FM Syllabus E. Business Finance - Equity as Finance - Notes 1 / 1
Equity is generally more expensive than debts
| Type of Finance Method | Description | Key Issues |
|---|---|---|
| Rights Issue | For existing shareholders initially | No dilution of control |
| Placing | Fixed price to institutional investors | Low cost - good for small issues |
| Public | Underwritten & advertised | Expensive - good for large issue |
When a company issues shares to the public for the first time. They are often issued by smaller, younger companies looking to expand, or large private companies wanting to become public.
For the individual investor it is tough to predict share prices on the initial day of trading as there’s little past data about the company often, so it’s a risky purchase.
Also expansion brings uncertainty in any case