Why do businesses issue shares continuously?

In the current context, raising capital from bonds and banks is facing many difficulties. Therefore, many businesses choose to raise capital from stocks to increase capital to consolidate their business situation and increase resources for investment projects.

Explaining the context of billions of shares being released to the market this time, expert Dang Van Cuong, Head of Brokerage Department of Mirae Asset Vietnam Securities Company (belonging to a multinational financial group headquartered in Seoul, Korea) said that issuing additional capital to raise capital through the stock market is considered a good medium and long-term capital mobilization channel to support and replace the bond mobilization channel which is facing a crisis of confidence after many events of delayed principal and interest payments in recent years. Many enterprises in Vietnam have a capital structure with a thin equity ratio, so this helps enterprises increase their equity ratio without having to commit to repayment.

In the context of a thriving stock market, this capital mobilization channel is more favorable and attracts more growth potential.

Since the beginning of the year (May 23), the VN-Index has increased by 11.7% (an increase of more than 100 points). Although the market is considered to be entering a "shaking" point at the resistance zone of 1,280 points, experts and many investors are still optimistic about the market, after looking back at the historical milestones that the VN-Index has established in the first months of the year.

Impact on the stock market

According to Associate Professor Dr. Nguyen Huu Huan, Head of the Financial Market Department, Ho Chi Minh City University of Economics , the positive point that can be seen when a large number of shares will be issued to the market is that it helps the stock market become more diverse, investors have more choices in stocks. If favorable, the increase in both quantity and quality of stocks will make the stock market more attractive, attract more interested investors, and liquidity will increase in the near future.

Sharing the same view, many experts shared that the additional shares issued will support a "hotter" stock market, better investor sentiment, along with abundant capital mobilization for businesses, helping businesses strengthen their financial capacity to implement and invest in projects. This contributes to boosting the economy when money is circulated in the market instead of "stagnant".

In addition, Associate Professor Dr. Nguyen Huu Huan also mentioned the negative side of issuing too many shares while investor demand is not high or the stock price is not reasonable, this will have a negative impact on the stock market in general and the stocks of enterprises in particular.

Specifically, the supply is too much compared to the demand, which will cause the market index and stock price to decrease, thereby reducing the assets of investors holding corporate stocks and the capitalization of the enterprises themselves will also be pulled down. In addition, it can also affect their brand and reputation.

In general, capital increase plans usually show the optimism and ambition of the enterprise in promoting production and business activities. This is an event that attracts a lot of attention from investors, helping to boost stock prices on the stock exchange.

In reality, issuing additional shares is not always as desired by businesses. Many companies have had to postpone, suspend, or even "fall into unsaleable territory" when shares were issued but no one bought them due to unfavorable market conditions, unattractive business potential, or too high offering prices...

Therefore, for investors, before deciding to trade, it is necessary to consider many aspects and factors from stocks, business results of the enterprise and market situation.

(To be continued)