FMF9
Syllabus E. Business Finance E1c. Equity finance

Equity as Finance 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