ISSUE OF SHARES, INTRODUCTION

 ISSUE OF SHARES

Hello class 12 Students,

Today, we'll delve into a crucial topic in the world of finance and business – the issuance of shares. Shares, also known as equities or stocks, are an essential component of a company's capital structure. They represent ownership in a company and provide a way for companies to raise funds. Let's explore the key concepts related to issuing shares.

1. Share Capital and Types of Shares:

Share capital is the total value of shares issued by a company. There are two main types of shares: common shares and preferred shares. Common shares offer ownership rights and voting privileges, giving shareholders a say in major decisions. Preferred shares, on the other hand, often don't have voting rights but come with a fixed dividend rate and preference in receiving dividends.

2. Issuance of Shares:

Companies issue shares to raise capital for various purposes like expansion, research, and development. The process involves several steps, including obtaining regulatory approvals, setting an issue price, and determining the number of shares to be issued. The total number of shares multiplied by the issue price gives the company's market capitalization.

3. Primary Market vs. Secondary Market:

Shares are initially issued in the primary market through an Initial Public Offering (IPO) or a Further Public Offering (FPO). In an IPO, a private company goes public by issuing shares to the general public. The secondary market, represented by stock exchanges, allows investors to buy and sell existing shares among themselves.

4. Factors Affecting Share Price:

The price of a company's shares is influenced by a range of factors, including its financial performance, industry trends, management competence, macroeconomic conditions, and market sentiment. Positive news can lead to a rise in share prices, while negative news can cause a decline.

5. Rights Issue and Bonus Issue:

A rights issue involves issuing additional shares to existing shareholders at a discounted price. This allows the company to raise funds from its current stakeholders. A bonus issue, on the other hand, involves distributing additional shares to existing shareholders as a reward for their loyalty.

6. Dilution and Earnings per Share (EPS):

Issuing new shares can lead to dilution of ownership for existing shareholders. Dilution occurs because the total number of shares increases, potentially reducing the percentage ownership held by each shareholder. This can impact metrics like earnings per share (EPS).

7. Regulatory Considerations:

The issuance of shares is subject to regulations imposed by regulatory authorities like the Securities and Exchange Board of India (SEBI). These regulations ensure transparency, protect investors' interests, and maintain the integrity of the capital markets.

In conclusion, the issuance of shares is a fundamental mechanism for companies to raise capital and expand their operations. It's important for investors to understand the different types of shares, the factors influencing share prices, and the regulatory framework surrounding the issuance process. Whether you're a potential shareholder or a company executive, having a clear grasp of these concepts is essential in navigating the dynamic world of finance.

I hope this lecture has provided you with a solid foundation to comprehend the intricacies of issuing shares. If you have any questions or would like to discuss any aspect further, please feel free to ask. Thank you.

SB SIR COMMERCE