Thursday, April 16, 2009

When do companies issue common stock?

Companies issue common stock under 2 circumstances:

  1. when they absolutely have to
  2. when they're stupid not to
Case 1: In bad times, companies may issue common stock to raise money and pay off their debt or fulfill other obligations.

Case 2: In good times, companies can raise huge amount of money taking advantage of high stock prices. The money may be used for fueling further growth and projects or for nothing :). Just because other companies are taking advantage of high stock prices some rouge companies do follow the trend.

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