Explain the two distinct methods of raising capital through shares. Also, discuss comprehensively the advantages and challenges faced in each of the method.
Two Distinct Methods of Raising Capital Through Shares are :
1. Primary Market:
In the primary market, companies issue new shares directly to investors. This process is known as an Initial Public Offering (IPO). Here's how it works:
Advantages:
- Capital Infusion: The primary advantage is the infusion of fresh capital into the company. This capital can be used for various purposes such as expansion, research and development, debt repayment, or other strategic initiatives.
- Enhanced Visibility and Credibility: Going public in an IPO often enhances a company's visibility and credibility. It provides a platform for the company to showcase its potential and attract more stakeholders.
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