What do you say about the subject above… I think it can be done by doing a simultaneous offer for sale (private investor) and issuing new shares to current shareholders…
transaction:
Get the private investor and sell him/her your shares at a premium… use that premium to issue more shares to yourself in the company… however disclose this transaction to the investor.
lets say you want to raise capital to 1 billion from current 700 million…
sell a minority stake at a premium price… you get the premium for the current share holder and simultaneously issue new stock to the shareholders by that amount…
why do this…? to raise the capital … without the current shareholders injecting cash…
any comments on the above structure??
another way might be to issue shareholders stock against receivable from shareholders and sell the shares to a private investor … use that premium to pay off the receivable and voila … its done (however this may not be allowed in some jurisdictions) its as far as i know allowed in Pakistan.
please comment on the structures … how they can be refined or any legal issues that may arise …
I’m not sure why you’d want to increase equity before you increased equity. Just doesn’t make sense to me.
Say you want to raise $300m in equity (to increase capital from $700m to $1,000m). Why not just sell $300m in shares?
Why would you want to sell shares to a private investor prior to an IPO? Isn’t an IPO (by definition) selling shares to outside investors?
And why would anybody voluntarily and willingly pay you a premium for your shares, knowing that you were going to use the premium to buy more shares (presumably at fair value), then dilute their own holdings in an IPO?
Just seems like the whole thing is a waste of time.
It seems to me there is no reason to issue any additional stock to current investors, presumably whoever is investing outside money will consider this in their analysis. Even if you got someone to overpay for, say a 30% interest (post money), it doesn’t matter if you issue extra shares before/after, he or she will still end up with 30%, unless you somehow trick them.
Also agree with greenman, good luck finding someone to invest with these kinds of terms.
Create a revaluation surplus account by taking of PPE revaluation. You will reach equity position rapid increase but might led to immediate tax base increase.
not looking for someone to invest its just a structure … because some one asked me this question on how can a company issue shares to its own shareholders without them investing their own cash… so came up with this structure which seemed legit … thats why asked if there are loopholes in this
Recapitalization can be processed from retained earnings position by converting not paid dividends to paid in capital but such action will not increase total equity. If those shareholders are also creditors (have some receivables other than dividend to own company) they can convert those receivables to paid in capital. In such case equity position would increase. Beside cash, by some legislation, shareholders may invest assets other than cash into company and receive issued shares. Check legislation in your country.
Thanks Flash… Can equity be raised… by saying the shareholders havent paid cash yet… but its a receivable from shareholders… so company Assets rise as receivable and company equity rises by same amount… this particular structure is as far as i remember allowed in Pakistan… is it allowed in Croatia… or EU and US ?