New share issues

• What is a new share issue?

  Issuing shares for payment to shareholders
• What type of finance is new share issues classified as?

  Equity finance
• What makes new share issues an external source of finance?

  Funds come from outside the business
• Why is new share issue considered a long-term source of finance?

  It provides funds that do not need repayment
• Who is new share issues suited for?

  Established businesses
• What are the pros of using new share issues?

  • No interest payments required
  • No repayment obligation
  • Access to large volumes of cash
  • Employee profit-sharing incentives
  • Exit strategy for founders
• What is a significant advantage of using equity over debt?

  No interest needs to be paid
• What opportunity does a public limited company have when issuing shares?

  Access to large volumes of finance
• How can new share issues motivate employees?

  Through profit-sharing incentives
• What is an exit strategy for founders?

  Realizing investment by selling shares
• What are the cons of using new share issues?

  • Loss of ownership control
  • Expectation to pay dividends
  • High flotation costs
  • Ongoing regulatory fees
• What is a major concern when giving up 51% of a business?

  Loss of control over decision-making
• What do shareholders expect if the company makes a profit?

  Payment of dividends
• What is a potential cost of flotation for a public limited company?

  Up to £100,000
• Where are retained profits found?

  Statement of financial position
• What must public limited companies comply with when issuing shares?

  Regulatory rules and financial statements
• What is an annual fee for being on the stock exchange?

  £5,000 to £6,000
• What are the implications of ongoing regulatory requirements for public companies?

  Increased administrative costs and labor