Equity financing

equity financing

• is a strategic tool for companies to access capital without incurring debt, but it comes at the cost of ownership dilution and shared control.

• how they play out depends on the financing stage and structure—whether it's private (PE) or public (IPO/FPO).

private equity debt

• is defined as the investment of capital into a private (not publicly traded) company in exchange for equity ownership

• typically involves private equity firms, venture capitalists, or angel investors for purposes like growth funding, turnarounds, or leveraged buyouts (LBOs)

• often results in investors gaining board seats and significant control, with exit strategies including an IPO, sale to another firm, or recapitalization.

initial public offering (IPO)

• occurs when a private company offers its shares to the public for the first time by listing on a stock exchange

• transforms the private entity into a public company, raises large amounts of capital for purposes like expansion, R&D, or debt repayment

• requires regulatory approval (e.g., SEC in the U.S.) and underwriting by investment banks

• results in increased transparency and disclosure obligations

• follfinal share price determined through book-building or auction methods.

follow-on offering (fpo)

• is defined as an issuance of additional shares by a public company after its Initial Public Offering (IPO). T

• is primarily used to raise more capital for purposes such as expansion, acquisitions, or debt reduction

• is typically priced based on current market conditions, often at a discount to the current market price

• may impact the share price due to potential dilution concerns.

dilutive fpo

new shares are issued, increasing share count

non-dilutive fpo

existing shareholders (like founders or VCs) sell their shares