What are the Benefits and Drawbacks of Raising Share Capital?
Raising share capital offers several benefits but also comes with certain drawbacks: Benefits
No Repayment Obligation: Unlike loans, share capital does not require repayment, reducing the financial burden on the company. Increased Capital: It provides a substantial amount of capital that can be used for various business activities. Enhanced Credibility: A successful capital raise can enhance the company's credibility and attract more investors.
Drawbacks
Dilution of Ownership: Issuing new shares dilutes the ownership stake of existing shareholders. Increased Scrutiny: Public companies are subject to higher levels of regulatory scrutiny and must disclose financial and operational information. Dividend Obligations: Shareholders may expect dividends, which can be a financial burden on the company.