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This is just a guess but my intuition is that a company issues stock in order to raise capital. So if the company has a useful investment opportunity that woul
by lukesandberg 15y ago
This is just a guess but my intuition is that a company issues stock in order to raise capital. So if the company has a useful investment opportunity that would affect its long term profitability then raising the capital in equity markets might be a good strategy. Rational investors would weigh the possibility of stock dilution vs. long term profitability and make a choice.
- studentrob 15y agoYea that makes sense, so obvious now that I think of it. Presumably it's easier or more cost effective to raise capital this way than to try to issue bonds. Thanks!
- dfc 15y agoI hope this was not a hw question for you.
- studentrob 15y ago? thanks for making my question seem dumber
- dfc 15y agoNo worries;) I only said that because of your username...