The Advantages of Issuing Stocks

There are many advantages for a public limited company to issue stocks or shares, such as the follows:

1) When a company issues stock to the general public, the company is selling ownership shares to the public in return for cash payments. The cash raised from the issue can then be used to pay off the debt and operating expenses.

2) When the company issues stocks in order to buy back debt securities, it increases the proportion of equity capital as compared to its debt. This can lead to a healthy proportion of equity capital, as opposed to debt.

3) Reward and retain employees: A company that issues shares can use shares as a form of incentive or employee compensation. For instance, employees can buy stock a discount, be given it as a bonus, or obtain stock through a profit sharing plan.

4) A company can issue shares of stock to finance further expansion, e.g., use stock to buy other companies.

5) A company can issue shares to finance the redemption of preferred stocks.

* Next: Advantages and Disadvantages of Stock Trading
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