Kembara's Financial Solutions - Equity
Businesses wishing to obtain capital may choose to sell stock as an alternative to bank loans. Equity, which denotes ownership, is sometimes referred to as shares or stock. The owners of a firm are the people who hold its equity. As a result, a corporation that has been formed as a business can raise money by selling shares. Just like in the earlier CareerComic example, money was raised by selling a portion of the company's equity. So why should equity be preferred to borrowing as a source of finance? There are several distinctions between the two that must be taken into account. The fact that interest must be paid on borrowing and that the money must be repaid may be the main differences at this time. Equity is not subject to interest charges and does not require repayment. Shares sales are not just used by startups to raise capital; occasionally, huge corporations will engage in initial public offerings and sell significant amounts of equity (IPOs). A notable instance is Zoom Inc.'s significant IPO, which occurred in April 2019. Zoom Inc. is a US communications company. In its April 2019 initial public offering, Zoom Communications inc. sold 20.1 million shares at a price of $36 each, generating a total of just over $725 million and valuing the firm at $9 billion. The shares doubled to $72 on the first day of trade. Zoom's business then had enormous growth during the COVID-19 epidemic that occurred in March 2020 and put the entire world on lockdown, and its share price reached $250 in June 2020. As a result, several investors sold their shares for a substantial profit. These investors' shares would have doubled once more if they had continued to hold onto them, though. Zoom's share price was $441 in March 2021, more than 10 times what it was at its initial public offering.
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