Issue Stock
Corporations issue shares of stock to raise money for their business. The shares that are issued represent the amount of money invested by the shareholders in the company. Shareholders have an ownership stake in the company and enjoy certain rights, such as voting rights and the receipt of dividends.
Why is it important? Companies have to invest in themselves.
The old maxim: “you need to spend money to make money.” If a company doesn’t issue stock or bonds, it will need other ways to capitalize, or will fail to launch.
Related or Semi-related Video
Finance: What is "when-issued"?4 Views
finance a la shmoop what is when issued all right well it's a trading condition [Definition of when-issued]
that applies to spin-offs or other structural changes in companies such
that a new thing or entity is created which will have its own separate set of
trading parameters and rules and elements and yeah okay well this one's [Woman looking confused]
just easier with an example
shmoop enterprises global or shmeg creators of the finest hand cream soap [Bottle of Shmeg hand cream is taken off a shelf]
jokes on the planet decides to spin off its European business as a separate
company based in Paris we like the food and the tiny dogs and the arrogance and [Woman sat with a dog on her lap at a picnic table with a plate of food]
the armpit hair so we here at shmoop central declare that all shareholders of
SHM egg will get 0.35 shares of shmoo or a new company to be spun off of the [Shmeur stock being given to to Shmeg]
parent that new company will sell the same products as sh meg make them the
same way albeit with more european union labor and sell them only in Europe and [Guy working in a warehouse wearing a beret]
we mumbled that this notion makes sense because Europe is so protectionist
against them damn foreigners like us trying to sell anything into the [Definition of protectionist]
continent yeah they make us hire their labor first we're gonna sell stuff to
them and it's hard to sell anything into the continent and while we really try [Woman begging European businessmen]
hard to be incontinent ok the spin-off of shmore from Shmeg will officially [Newspaper article about the spinoff]
happen on May 4th our favorite day of the year and no it's not Bastille Day
but this security which will actually be trading on May 4th will begin trading on [May 4th highlighted on a calendar]
February 2nd as quote when issued unquote well why are securities kind of
traded here before they are actually traded like when issued is a kind of [3 zombies in front of a burnt down city]
zombie apocalypse derivative of an actual security being traded so like why
do it well in large part because when spin-offs like this happen there is an
unproven market with ambiguous market demand and appetite for those securities
maybe the Europeans are still angry we didn't enter the big one sooner and help [List of grudges against the US]
save them from the Nazis maybe they don't like Jack's secret sauce well [Pot of sauce appears next to a burger]
maybe just don't like our president and like
who doesn't like Oprah so what are they thinking anyway well but whatever the [Oprah giving a speech]
ability to kind of sort of test the market in the form of a when issued
security is a dandy ingredient to smooth friction sometimes a trust at big local [Pan of vegetables with when-issued stock]
partners might be brought in to commit to buying say 10 percent of a given when
issued security at a set price to hopefully stabilize a very uncertain [The big local partner looks excited]
market place and make it certain that when issued transactions that won't [Shmeg stock chart going up and down]
crater the parent company stock when it then comes time to actually begin
trading in February as when issued well the people who really want shmore can't [Big line of people]
rush to the head of the line so may the shmore be with you
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