When Australian companies don't have enough capital?

[victoria]

Hello,

I want to invest some Australian shares, but I have one question.

When the Australian companies has not enough capital,

What do they do for make more capital?

In Korea, they make new stocks for increase capital. such as CB(Convertible bond) and BW(Bond with warrant).

Do they have those kind of stocks as well?



Thanks,

 

[Jack Aubrey]

I'm no expert, but my experience over the past two years is that companies have a few options, including issuing different types of additional shares and borrowing.

I have holdings in companies that have "placed" new shares with large institutions at a set price approved by their board. I other cases, new shares have been offered to all existing shareholders at a set price (usually a discount to current market price). I all the cases I have known, the offer has been for "Fully Paid" or "Ordinary" Shares but larger companies may use other methods, including convertible bonds. Some companies also issue share Options that can be converted at a later time to Ordinary shares. These methods all involve some amount of "dilution" - that is an increase in the number of shares on issue without necessarily increasing the value of the company.

Others can probably explain this better and add other information.

 

[Craton]

The meaning of Capital.

There are many way that companies can raise capital including the creation of new types of shares, e.g. create a Capital "R" share type, issued for a cash loan then once the loan (plus interest of course) is paid back, this share type might/may be cancelled.

Of course, it would be up the the individual company and their "investment grade" rating on how to raise more capital.