The key reason why companies issue stocks is to raise funds needed for a variety of goals, including development and expansion.
Issuing shares in a company on a stock market can be a significant opportunity for businesses that need money to invest in the development of new products, build some new facilities, and fulfill other tasks peculiar to expansion or development.
Aside from these tasks, funds received from shareholders can help companies to maintain and improve their position in the market by reducing debt, hiring new employees, and increasing their market value.
Any company possesses assets of different types, and these assets can be used to increase available funds by selling some portions of profits, which helps to attract new parties interested in a company’s further growth and financial success. Companies are often in need of extra funds when planning to implement new strategic goals or even entering new markets.
To raise funds, businesses often have to resort to high-risk and costly strategies, such as contracting loans, but banks are only interested in getting their money back without delays. When issuing stock, an organization develops a kind of partnership relations with investors and gets funds from parties that would be happy to see its growth but also recognize the risks of getting no dividends.
They give a company an opportunity to use their funds in return for some part of its profits and even some voting rights. Gradual increases in issued stock result in the presence of new funds to facilitate the implementation of development goals. In general, businesses issuing common and preferred stock can use the raised funds for a huge variety of purposes, and each company is free to sort out priorities.