Subjects

Business

Explore Business
Search

Both private and public companies can raise finance by selling new shares in the company.

There are two main options open to a publicly-quoted company – i.e. a company whose shares are quoted and traded on a recognised stock exchange.

Flotation – new issue of shares

A stock market flotation is a costly way of raising new capital which involves selling a percentage of a company's on a stock market for the first time.

In reality, a stock market flotation is only an option for businesses with a value usually over £50 million, given the costs involved. In recent years, the number of flotations has declined. It is a lot easier for larger private companies to achieve an "exit" for their shareholders or raise substantial finance by selling some or all of the business to venture capital funds.

A flotation provides a way to raise substantial new capital for a business and to allow existing shareholders to achieve a full or partial disposal of their investments.

The major change that arises from a flotation is that the shareholder base of the company becomes much wider; potentially many thousands of private shareholders invest in the business alongside the larger "institutional" investors such as pension and insurance scheme funds.

Rights issue or open offer

A rights issue is a relatively common way for a company to raise fresh capital. The company issues new shares, offering them first to existing shareholders.

Shares in a rights issue will often be offered at a significant discount to the current market price, particularly if the shareholders' appetite for the shares needs to be encouraged.

An alternative to a rights issue is an open offer where shareholders are simply invited to subscribe for new shares based on their existing holdings. This can be less complex than a rights issue but it does not give shareholders the opportunity to trade their rights to take up shares and so benefit from the discount.

Featured
45
Series

BUSS4 Section A 2015: UK Manufacturing

We'll use this Series to curate resources that support teachers and students preparing for the BUSS4 Section A Research Theme on Manufacturing in the UK (June 2015). These resources will complement our popular BUSS4 Section A Toolkit on Manufacturing and the BUSS4 Exam Coaching Workshops which also include sessions on Manufacturing.

Read more ›

Teaching & learning products

AQA BUSS3 Revision Guide

The leading quick revision guide for BUSS3. This 20 page full colour guide provides a concise overview on the key knowledge that students need to apply to the BUSS3 exam case study together with advice on exam technique.

£4.00

Edexcel A Level Business Year 1 (AS) Course Companion

Our Year 1 (AS) Course Companion is the designed as a high quality and cost-effective replacement for expensive and overly complicated textbooks. The Course Companion maps precisely against the specification and teaching content for Year 1 (AS) and provides students with comprehensive and concise coverage of what students really need to know and understand.

£100.00

Close

Business