Raising Extra Capital As companies mature, their business needs change. This typically causes the need to raise...

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Finance

Raising Extra Capital
As companies mature, their business needs change. This typicallycauses the need to raise extra capital to begin an expansionproject. An influx of capital funding may be necessary to constructor purchase a new structure, testing and developing new products, amerger, acquisition, or take over. Nevertheless, the business mayseek to acquire capital from ether a debt or equity IPOoffering.
If you owned a large company and needed capital for a majorinternational expansion project would you prefer to do an IPO stockoffering or corporate bond offering and why?
Explain the pros and cons of an IPO stock offering (equity) orcorporate bond offering (debt).

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3.7 Ratings (473 Votes)

The pros of an IPO are Dividend is not required to be paid mandatorily The decision to pay dividend and the rate of dividend if it is to be paid is at the discretion of the board of directors Large amounts of capital can be raised as the risk of investment is borne by a large number of investors Public awareness of the company is increased The cons of an IPO are An IPO process involves regulatory hurdles and a lot of paperwork A See Answer

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