Why Does a Company Issue Stocks?

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A company issues stocks in order to raise money so that they can grow and work on new projects or products. Discover why people buy stocks to share in the risk of a company's dream with help from a licensed financial planner in this free video on the stock market and investing.

Part of the Video Series: Stock Market
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Video Transcript

Hello, my name is Bill Rae. I'm with Alumni Financial Services and I've been in the business and finance world for well over 20 years and your question is why does a company issue stock? Well that's an excellent question. First of all, let me start off by telling you I'm not here to give stock advice or to solicit you to buy stock. You need to talk to a licensed professional for that. However, with that being said, why does a company issue stock? Well in it's simplest explanation, a company will issue a stock in order to raise money. The reason for raising money could be as varied and as wide as America has businesses. For instance if I owned a company and I knew that I needed a half a million dollars to buy certain equipment that will allow me to develop a product, well I also might need to have people to help me sell that product. When I sit down and add it up, I realize that I need to come up with say a million dollars in order for this project to work. My choices are I can try for a loan at a bank, I can try for a line of credit, I could issue bonds or I could go out and sell a portion of ownership in my company getting other people who are willing to share the risk of my dream or my adventure. That's why a company will issue a stock. As always, if you're going to look at buying stock, we recommend you sit down and take a look at your situation, get a good feel for what risk you're willing to take and then seek outside counsel. Talk with a licensed adviser. My name is Bill Rae, I'm with Alumni Financial Services and as always, we're here to help you build wealth.


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