When a large number of investors subscribe for new shares, they need to draw lots for allotment, which is also called drawing new shares. Investors who subscribe expect to sell at a price higher than the subscription price.
Funds obtained through stock listing do not need to be repaid in a certain period of time. On the other hand, these funds can immediately improve the company's capital structure, so that the company can borrow loans at lower interest rates. In addition, if the IPO is very successful and the future market trend is very strong, then the company may issue more shares at a better price in the future.
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Disadvantages of listed companies
Among all the changes brought about by public listing, a company has lost its "privacy right", which is the most annoying. The US Securities Regulatory Commission requires listed companies to disclose all accounts, including the salaries of senior managers, bonuses of middle managers and the company's business plans and strategies.
Although this information does not need to include every detail of the company's operation, all information that may affect investors' decision-making must be made public. This information must be publicly disclosed at the time of initial listing, and the latest situation of the company must be continuously informed thereafter.
The result of losing confidentiality is that the company may stop paying dividends or reducing salaries to relevant personnel at this time. Originally, these are normal for a non-listed company, but they are hard for a listed company to accept.