The concept of offering securities to the public
A public offering of securities is the offering of securities by one of the following methods:
- Offered for sale through mass media;
- Offering to 100 or more investors, excluding professional securities investors;
- Offers for sale to unknown investors.
Purpose and role of offering securities to the public
For the economy and society, offering securities to the public will bring the necessary capital to promote socio-economic development.
For the stock market, offering securities to the public is a very important activity that directly affects the existence and development of the stock market. It can be said that offering securities to the public is the supply of goods for the primary market. After being offered to the public, securities are often widely traded, can be bought and sold easily, which means that it has created liquidity for the secondary market. At that time, the new stock market can promote its role as a channel to mobilize and allocate the main capital of the economy.
For corporate issuers, offering securities to the public is an important capital mobilization channel to help enterprises solve capital needs while avoiding excessive dependence on credit capital of financial institutions. In addition, offering securities to the public can increase the value of the business. After an initial public offering, the liquidity of the securities will often increase along with the company’s reputation, causing the selling price of securities on the market to increase. At that time, the real value of the company will be determined by the number and price of securities traded on the market
Features of offering securities to the public
First, it must be registered with the State Securities Commission, except in some cases.
Second, it is usually done through intermediaries who are underwriting companies or issuing agents.
The third, which is carried out on a large scale, shrinks the large number of investors.
Fourth, the total value of newly issued securities must reach a certain value.
For organizations implementing guarantees, the following conditions must be met:
- Tobe licensed by the State Securities Commission to underwrite securities;
- Meet financial safety criteria as prescribed;
- Vv is not a person associated with the issuers.
Advantages and disadvantages of offering securities to the public
Advantages: raising capital to meet diversified capital needs in operations; increasing liquidity for securities of issuers; increasing the reputation of the issuer and reflecting the true value of the public company.
Disadvantages: costly; the disclosure regime applied to public companies is very strict, company managers lose the dynamism to handle legal situations that require approval from the general meeting of shareholders; management decisions can be affected by the share price because if the market price falls will affect the reputation of the company.
Above is the content of KALF’s advice on the concept of offering securities to the public and some related legal issues. All of our above advice opinions are based on applicable legal provisions. If you have any questions or requests about legal issues, please contact us for timely answers.
