Before stocks are issued on the market, the listed company signs an agency issuance contract with the stock issuance agent and the securities firm determines the method of stock issuance and clarifies all responsibilities.
According to the different risks borne by the issuance, the method of stock agency issuance is generally divided into two types: underwriting issuance andagency issuance.
1. Underwriting issuance
The brokerage firm acting as an agent for stock issuance underwrites all or part of the newly issued shares of a listed company at one time and pays all the capital equivalent to the issue price of the shares in advance.
Since financial institutions generally have a larger pool of capital that can be paid in advance to meet the immediate needs of a listed company for large sums of money, companies are usually willing to transfer their newly issued shares to a brokerage firm for underwriting in one lump sum.
If the number of shares issued by a listed company is too large for a single brokerage firm to underwrite, several brokerage firms may also join together to underwrite the issue.
2. Consignment issuance
The securities companies only charge a certain amount of handling fee to the listed companies for the distribution of securities.
The underwriting method can meet the urgent needs of capital of listed companies as they can raise a large amount of capital within a short period of time. However, the securities underwriters will only purchase the securities at the primary issue price or lower, which will inevitably deprive the listed company of part of its due income.
For the listed company, although the consignment issuancecan provide more capital than the underwriting issuance, the entire payout time may take longer. As a consequence, companies may not be able to get the capital needed in time.
In addition, listed companies will always consider the following factors when choosing the listing time of their shares:
(1) Stock market quotes should be positive at the time of preparation and for a foreseeable period of time in the future.
(2) Make adequate preparation for the business in the coming year so that the public can anticipate the company will perform even better next year.
(3) The company should be listed after the internal management system, dividend, and dividend distribution system, and part of the staff's allocation has been determined, and the future development policy has been clearly defined.
When looking at a company about to go public, investors can sometimes tell more about the company by looking at and analyzing its issuance method and the maturity of its listing date than by reading its listing announcement.