Role of Equity Securities

Companies issue equity securities in the primary markets in order to raise capital and increase liquidity. Having public shares also gives the company another currency to make acquisitions with or incentivize employees.

The goal of raising capital is to maximize shareholder wealth, which may be done through financing the purchase of long-lived assets, capital expansion projects, research and development, and/or the entry into a new product or geographic regions. In some rare cases, capital is raised only to keep a company operating as a going concern.

Reading 39 LOS 39f:

Explain the role of equity securities in the financing of a company’s assets

 

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