apital market is one of the most important segments of the financial system all over the world. It is the market available to the companies for meeting their requirements of the long-term funds. It refers to all the facilities and the institutional arrangements for borrowing and lending funds. In other words, it is concerned with the raising of money capital for purposes of making long-term investments. The market consists of a number of individuals and institutions (including the Government) that canalize the supply and demand for long -term capital and claims on it. The demand for long term capital comes predominantly from private sector manufacturing industries, agriculture sector, trade and the Government agencies. While, the supply of funds for the capital market comes largely from individual and corporate savings, banks, insurance companies, specialized financing agencies and the surplus of Governments. Capital markets are generally of two types:
Primary market (new issue market):- Deals with 'new securities', that is, securities which were not previously available and are offered to the investing public for the first time. It is the market for raising fresh capital in the form of shares and debentures. It provides the issuing company with additional funds for starting a new enterprise or for either expansion or diversification of an existing one, and thus its contribution to company financing is direct. The new offerings by the companies are made either as an initial public offering (IPO) or rights issue. Secondary market/ stock market : The market for buying and selling securities of the existing companies. Under this, securities are traded after being initially offered to the public in the primary market and/or listed on the stock exchange. The stock exchanges are the exclusive centers for trading of securities. The simplest form of entry strategy is exporting using either a direct or indirect method such as an agent, in the case of the former, or countertrade, in the case of the latter. More complex forms include truly global operations which may involve joint ventures, or export processing zones. Having decided on the form of export strategy, decisions have to be made on the specific channels. Pons and Cons to Company moving into the Capital Market
The going public process is an expensive consideration, and even more so for small cash-strapped young companies. When a company is contemplating the process of going public, it must consider the pros and cons involved in making that decision. Additionally, there are new responsibilities involved when a private company becomes a publicly traded business. Although many benefits can ensue from going public and the related IPO services, the company directors and principals must critically judge all the options and impending tasks of becoming a public company. The following are pertinent considerations that need be touched upon with the help of an experienced securities attorney; he can help your company evaluate the positively Impact s and Negatively Impact s of an Initial Public Offering (IPO). The following analysis is in order to help you make a decision that is best suited for your business.
Once a private company becomes publicly traded, it will register securities so that it can make an offer and sell them to the investing public. This is the biggest difference in operational status of a private vs. public company: The public company can offer its stock to the public at large, whereas the closely held private company is restricted to private venues, such as friends and family members. This is a very important consideration since most companies that go public are interested in raising capital. Furthermore, investment bankers and broker-dealers prefer to deal with a public company. A well ran private company with a healthy bottom line, quarter after quarter, is an excellent candidate to go public and attract outside investment capital. The increased...