What does it mean when a company issues more common stock?

When a company issues additional shares of stock, it can reduce the value of existing investors' shares and their proportional ownership of the company. This common problem is called dilution.

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Proposed issuance of common stock

Share Common Issuance

Name: Proposed issuance of common stock
Brand: US Legal Forms
Price: 59.00 USD
Rating: 4.72 (322 reviews)

Category:

Corporations - Public - Sale or Purchase of Capital Stock

State:

Multi-State

Control #:

US-CC-4-513C

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Instant download

Description Issuance Stock

This sample form, a detailed Proposed Issuance of Common Stock document, is a model for use in corporate matters. The language is easily adapted to fit your specific circumstances. Available in several standard formats.

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Issuance Stock Order FAQ

A public offering is the sale of equity shares or other financial instruments such as bonds to the public in order to raise capital.The financial instruments offered to the public may include equity stakes, such as common or preferred shares, or other assets that can be traded like bonds.

When a company issues additional shares of stock, it can reduce the value of existing investors' shares and their proportional ownership of the company. This common problem is called dilution.

Generally, a company has two options to account for stock issuance costs: Debit to Paid-in Capital: treats issuance costs as a reduction to paid-in capital in excess of the security's par value.

Stock issuances are public offerings of shares, also known as partial ownership, in a formerly private company in exchange for money. The company then uses this capital for expansion, debt payment or other purposes.

A public offering is the offering of securities of a company or a similar corporation to the public. Generally, the securities are to be listed on a stock exchange.The services of an underwriter are often used to conduct a public offering.

The entry to record the issuance of common stock at a price above par includes a debit to Cash. Cash is increased (debit) by the issue price. The journal entry would also include a credit to both Common Stock (increased) and Paid-In Capital in Excess of Par--Common Stock (increased).

To record the stock purchase, the accountant debits Investment In Company and credits Cash. At the end of each period, the accountant evaluates the value of the investment. If the value declined, the accountant records an entry debiting Impairment of Investment in Company and credits Investment in Company.

It's typically good news for investors, because it means that after having their investment locked up for nine or ten years, they can finally sell it in the public market and get their return!

If you are selling common stock, which is the most frequent scenario, then record a credit into the Common Stock account for the amount of the par value of each share sold, and an additional credit for any additional amounts paid by investors in the Additional Paid-In Capital account.

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Description Issuance Stock

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