Why do companies Issue shares on stock market?

All shares of a company carry an equal financial value. Issuing these shares for public investment opens the gates for the company to raise capital for growing and expanding the business. Once the company is listed on a stock exchange and the shares are bought by the investors, the capital flow starts. This allows the investors to have ownership in the company and earn profits, in the form of dividends. A company can issue more shares anytime to generate fresh capital by diluting the ownership interest of original shareholders and promoters

Issuing shares on stock market for the first time, brings prestige to the company as there are strict eligibility criteria for any company to go for public investment. Some of these criteria include being profitable for three consecutive years and having a steady stream of revenue among others. Fulfilling these criteria implies that the company has good financial health and is ready for growth. It also popularizes the brand name as the company gets listed on stock exchanges and its reach increases.

Issuing shares also serves the people who are already associated with the company. It provides an opportunity to venture capitalists or initial investors to liquidate their investment and serves as an exit opportunity. Similarly, the employee holding stock options can exercise the agreement to buy defined number of shares for a certain price. Generating capital through issuing shares also proves a cheaper medium compared to loans and debt financing as there is no interest applicable and dividend payout is subject to profit generating by the company.

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