XYZ company offers for subscription 10,000,000 ordinary shares of $1 each at $50 per share.
2006-10-28 23:54:33 · 4 answers · asked by popson 1 in Business & Finance ➔ Investing
The company is selling 10,000,000 shares of its stock to the public in order to raise money. The stock has a $1 par value and is being offered at $50 per share.
o Stock offerings are not just (or even typically) IPOs (initial public offerings). The can and are done by established companies as well.
o Par value (in this case, $1) is simply an arbitrary value. The difference between par and the $50 per share offering price is NOT a premium and is totally irrelevant.
o Companies sell shares when the need to raise money for some reason. Possible reasons include, but are not limited to, new investment opportunities by the company, the desire to pay down debt, etc.
In stock offerings, the proceeds of the sale go to the company. In typical stock sales that occur every day, proceeds of a purchase of stock go to the seller of that stock, not the company (unless, of course, the company is selling "treasury" shares - another topic altogether).
2006-10-29 01:13:15 · answer #1 · answered by Tomel 3 · 0⤊ 0⤋
Companies need money to start or expand their businesses, but they don't always want to, or can't, borrow money to do so. So the owners offer to sell a part of the company to others. They do so by issuing stock shares (If you own stock, you share in the ownership of the company). They offer those shares at a certain price. If people think that the company is a good company to invest in and the price of the shares are reasonable, they buy some. If the company does well its value increases. If the value increases, then those who own shares of the company see the value of the shares increase. If the company does poorly, then its value decreases and therefore, the value of the shares decreases. As companies grow, they usually issue more and more shares in order to expand the business.
2006-10-29 01:47:35 · answer #2 · answered by Tom D 2 · 0⤊ 0⤋
It means that the company is offering you a shareholding in it. ($1 Shares at a Premium of $49 = $ 50) The Co., is offering u shares at a Premium. If u apply for the shares and if u r allotted shares then u become a shareholder in the company. It is an easy & cheap way to become a shareholder in this way. If u want to buy the shares of the same company from the share market sometimes u may have to shell out quite a lot of money.
2006-10-29 00:06:07 · answer #3 · answered by skr 3 · 0⤊ 0⤋
Usually an IPO (Initial Public Offering), & each share represents a portion of ownership in that company.
2006-10-29 00:16:12 · answer #4 · answered by seansmunson 1 · 0⤊ 0⤋