Raising Funds
Raising Funds – How to raise money using your stock price as a ‘benchmark!”
Once you’re a public company it becomes much easier to raise funds because it gives your company and you more credibility and a benchmark-trading price to raise capital against.
This ‘benchmark price’ can be used as a standard to raise the capital you need. You can entice investors by giving them a private placement discount. This discount means that they will be able to purchase a set amount of stock for less than the public trading price, if they agree to hold onto this stock for a period of one year or longer.
Example of How to Use the Power of a Public Company
As an example, a company goes public without initially raising capital and begins trading on the open market at US $5.00 per share. An individual can go on the internet or walk into any stock brokerage firm and buy the stock at $5.00 per share.
Public companies in this situation often sell stock in a private placement at a very substantial discount to the open market price (in this example, perhaps $3.00 per share). The investors agree to hold the stock for a period of time. (The issuer can sell the stock themselves or have small broker/dealers assist them.) Because investors can buy the stock at a deep discount to the open market price it gives them quite an incentive to invest.
If you need to raise more money later you can issue additional stock.