FNCE20005 Chapter Notes - Chapter 9: Stock Exchange, Private Equity, Rights Issue
29 Jun 2020
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Gives the holder ownership of a proportion of the equity of a company. Right to receive dividends and payments upon liquidation. Residual claim - dividends received after company meets other obligations. Higher expected rate of return to compensate for greater risk. Right to be sold through the stock exchange. No maturity date so the company has no obligation to redeem them (unless they choose to undertake a share buyback) Higher proportion of equity --> lower risk of lenders suffering + lowers interest rate to pay on debt. Issuing more ordinary shares will force existing shareholders to outlay additional cash or suffer dilution of ownership. Venture capital = funding for smaller and riskier companies with potential for strong growth. Acquisition of a listed public company by a group of investors who privatise the company. Start-up financing - for a business less than 30 months old where funds are required to develop the company"s product.
