Why do companies need to issue shares to the public?

Why do companies need to issue shares to the public

Stock Markets are an important financial hub in the modern world. Thousands of companies are established through stock exchanges. But why companies issue shares and use the stock market to raise money.

Most companies are usually started privately by their promoter(s). However, the promoters’ capital and the borrowings from banks and financial institutions may not be sufficient for setting up or running the business over a long term. So, companies invite the public to contribute towards the equity and issue shares to individual investors. The way to invite share capital from the public is through a ‘Public Issue’.

Simply stated, a public issue is an offer to the public to subscribe to the share capital of a company. Once this is done, the company allots shares to the applicants as per the prescribed rules and regulations laid down by SEBI.

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