Public Offering

Public offering is the making available of a new securities issue to the general public.  The idea behind a public offering is to raise money for your corporation.  There are several rules and regulations you need to comply with in order to have a public offering.  Normally there is an investment bank that acts as the underwriter for the stocks sold to the public. There are two main types of public offerings, debt and equity financing.

Equity financing is when a company uses assets or ownership in the company to get the cash needed for continued growth. Selling stock through an initial public offering is basically selling partial ownership in the company. One downside to this type of financing is that some control over the company is lost when shares are sold to the public.

Debt financing involves selling debentures or bonds to the public with a promise to pay the amount back, plus interest, at a certain predetermined date. When a company uses debt financing, it is actually recorded on its balance sheet as a liability. A good aspect of debt financing is that no ownership in the company must be given up.

It is up to the company to decide which type of financing to use. Public offerings are a very popular way to raise equity financing because companies like being able to get funding without being in debt.

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