Share and Bond Issuer – What Is It? Why Companies Issue Shares?
Share and bond issuer is the company that issued these securities. There is a term as currency issuer - it is the country having this currency as national. So, we've figured out the terms. But there are still some unclear questions: who can be the share and bond issuer; which securities are issued; why do some companies issue shares and bonds, while others don't?
1.Who Can Be Share and Bond Issuer?
2.Issuer Is a Company That Issues!
3.When Are Shares Being Created?
4.Shares Must Be Bought in the Beginning!
Who Can Be Share and Bond Issuer?
According to international laws, shares and bonds can be issued by open joint stock companies, or joint stock companies. Further, you'll learn about their differences and where one can invest in.
- Joint stock company - is partnership whose securities are distributed only among employees of the organization. They are not traded at the exchange, and can be sold to the third party. On the one hand, all shareholders are interested in work, because the more hardworking they are, the more profits will be gained by the company, and the more dividends they'll get. Investor capital can be distributed in different ways. Sometimes, CEO has the controlling stake, and sometimes no one has, and several major shareholders have their weight at the board of directors. It often occurs that employees get shares instead of wages in a joint stock company, when it has no money. As one can guess, investors are not interested in such companies, because they can't freely buy shares - they must to work there. Though, there is a shade: we hire an employee to work in the company, buying shares through them and gain.
- Open joint stock company (OJSC) is the issuer of widespread shares. They can be bought at stock exchange or from other shareholders. So, OJSC's share are a very popular investment tool. Everybody or any legal entity can have shares of such a company, and if one gets the controlling stake, they become the actual owner.
As a rule, modern analysts try to predict market prices of OJSCs, traders use them for earning, etc.
We must mention that either those two kinds of companies have CEO as one of key persons. In some cases, they have controlling stake, and then vote for themselves when the board of directors chooses the CEO. However, it's not always like that. Some investors don't intervene in their companies' work and appoint a CEO from top-managers.
Issuer Is a Company That Issues
- It's the most traditional security, and everybody has heard of it, even if they have no relation to investments. Having bought a share stake, you become a company co-owner. The percent in the investment capital estimates which part of the organization belongs to you. What does it give to you? Firstly, you gain regular dividends, i.e. part of profits. Surely, bot all profits go for investors - the major portion remains in the company as the capitalization. Usually, shareholders get 10-50% of the net profit. Sometimes, there are no payments at all, because the company hasn't gotten any profits or has suffered losses. The problem of dividends is solved at the board of directors. Secondly, in case of bankruptcy of JSC or OJSC, you have a right to get what has left. But, shareholders' demands are the last thing, the first is when the company pays off all debts and bonds. Nevertheless, if a bankruptcy takes place, you'll still get some money. Thirdly, you'll be able to be present at the board of directors and manage the company. As a rule, to give some weight to your vote, you should have at least 5-10% shares. Though, for any unexperienced investor it will be anyway useful to attend at such meeting and get tough. You can sell liquid shares of OJSC by a market price at stock exchange or find a buyer yourself.
- This kind of securities is often used along with shares, but these two terms are completely different. A bond is a debenture, letting one demand money back with interest from the issuer. Not all OJSCs issue bonds, but you still have wide choice. You are not getting any right to manage a company buying a bond, but you'll be able to earn percentage of profits. Besides, banks, trusted by many people to keep funds, invest in bonds. Let's calculate: average deposit interest is 10% a year, and bond one - 25%. Thus, banks get 15% in net, and considering that any debt is calculated with compound interest formula, this value will only increase with years.
- The last kind of securities is so called depositary receipts. The most common are global and American depositary receipts. As one can guess from the name, they circulate in global market. Actually, this receipt is a share stake. It can include 2-10 securities. They were created to prevent mergers of foreign companies and national ones. So, foreign investors can buy those receipts, but other companies can't affiliate a company issued securities. Today, depositary receipts are traded with at London exchange and Wall Street.
When Are Shares Being Created?
- Usually, joint stock companies appear when there are many owners and all of them has made unequal contribution. For instance, if there are three co-owners, invested 25, 25 and 50% respectfully, such company is not likely to become a joint-stock. And if there are more than 20 owners, with 1.41%, 2.45%, 3.67%, etc., it's rationally to crate a joint-stock company from it.
- Sometimes, an organization gets the necessary capital for development, issuing shares. For example, it needs 1,000,000 $. Then, this company issues 1,000,000 shares 1 $ each and realizes them to shareholders. The acquired million is the authorized capital of the company, which becomes its capitalization. Later, the price if shares can rise and investors will gain multiple income.
- Privatization is very common today, and when another major company is privatized, it makes OJSC from it, and then does the IPO. Thus, there will be not the one owner, but a group of shareholders. It's profitable for the Government, because, firstly, the competition between investors rises, and secondly, great capital-holders don't appear, and most securities go to the middle class. This is theory, surely, and practice is often not the same absolutely.
Shares Must Be Bought in the Beginning!
An investor gains most when they have defined the future market leader. Usually, nominal values of shares (their initial value) are by far smaller than in five years. Having made correct investments, you can gain - ready? - up to 10,000% of your investments! Surely, you can lose money, but, I think you agree that one right investment will pay off a ten of failed ones.
Share and bond issuer - what is it? It's bot only a company issued the first stake of shares. As like any country, companies can issue whenever they prefer. But it rarely happens. In fact, when new securities appear, the previous ones lose their prices. And why would shareholders make a decision devaluing their assets? That's why a new issuing takes place only if very necessary.
So, share and bond issuer emits these securities. Analyze the issuer before investing. As the conclusion, I can add that any securities are high-liquidity and profitable tool for gaining, more than bank deposits. Furthermore, shares are not influenced by inflation, because when national currency falls, shares rise.