Question

Examine the various ways in which a company can grow in terms of its common stock.

Answer 1

There are various ways through which a company can grow in terms of its common stock. Issuing of common stock is one of the most valuable method through which an organization can raise finances without having an obligation to pay fixed rate of interest. Some of the primary ways through which common stock can be issued by an organization are as follows:

• Offer for sale: Under this way, the company will issue common stock to a issuing house, which is usually a merchant bank. The shares which are being issued are then further issues to general public.
• Private placement: Under this way, the company will issue shares to big institutional investors, some of these institutions include pension funds, venture capital organization etc.
• Public issue: Under this method, the company will issue shares directly to public by way of prospectus issue, the shares issued are then listed on a stock exchange which can be bought and sold by general public.
• Rights issue: Under this, the company will raise funds by issuing shares to existing shareholders firstly. The shares are usually issued at a heavy discount to the current market price of the company.
• Bonus Issue: Through this way company issues additional bonus shares to its shareholders, the company wants to retain its shareholders royalty through such issue, this is also another way of increasing the common stock base of the company in longer run.