The most important options raising funds in the securities market are stocks, bonds, hedge funds, commodities and options. In dependence of the new or previously issued stocks and bonds, we have the primary or the secondary securities market options.
PCC has the option to sell different kind of stocks; both of them represent partial ownership in a company. The stock value is expressed in three different ways: par value (the value set for PCC to the stock), market value (the price of the stock in the exchange market) and book value (the value of the stock for the PCC financial statement):
· Common stock. These stocks are the riskiest of all securities, and the market plays a key role defining its value through the company performance and expectations. The payment of dividend to the common stocks holders depends of the company performance and company policy as well. Some companies pay dividends also when they suffer unprofitable years (e.g. Bombardier).
· Preferred stock. Stock which provides a specific dividend that is paid before any dividends are paid to common stock holders; in addition preferred stock takes precedence over common stock in the event of a liquidation. Preferred stock shareholders have not any voting rights. Dividends paid to preferred stock holder are fixed and cumulative. This kind of stock has lower risk than common stock. There are four different types of preferred stock: cumulative preferred, non-cumulative, participating, and convertible.
PCC should work in the stock exchanges. The stock exchange is an organization of individuals formed to provide an institutional setting in which stock can be bought and sold. The members of the stock exchange will trade the PCC stock in the trading floor. PCC operates in the stock market; so, PCC should contact a Broker or who will receive the order of to exchange the PCC stock. For the sales of new stock, it is convenient to PCC to contact full-service brokers.
Financial markets have some advantages and disadvantages. Many issues could be considered an advantage or disadvantage according to the boundary conditions. Some advantages are:
- The tax payment decrease for the company and shareholders, the cost for PCC compared with other options (e.g. bonds, bank loan)
- A Company can raise more capital than it could borrow.
- A Company does not have to make periodic interest payments to creditors.
- A Company does not have to make principal payments.
And some disadvantages are:
- The tax payment increase for the company and shareholders, the cost for PCC compared with other options (e.g. bonds, bank loan)
- The principal owners have to share their ownership with other shareholders.
- Shareholders have a voice in policies that affect the company operations.
A bond is a written promise of payment to the lender in the future. The payment includes interest and capital. Bondholders have priority over shareholders in claiming for the corporation assets. Three characteristics define a bond: the issue date, the face value and the coupon rate.
PCC could issue corporate bonds. Corporate bonds may be categorized in one of two ways, according to methods of interest payment, and according to whether they are secured or unsecured:
· Secured bonds: they have reduced risk. They are issued by pledging assets.
· Unsecured bonds: they have higher risk than the secured bonds because they are not issued by pledging a specific asset.
PCC also could issue retirement bonds:
· Callable bonds: it could be paid off before the maturity date.
· Sinking funds: PCC should put enough money into a special bank account each year to cover the retirement of the bond issue on schedule.
· Serial and convertible bonds: it allows to the bondholders to accept common stock instead of cash in repayment.
The secondary trading in bonds occurs in the over-the-counter market (OTC). The OTC market consists of independent dealers who own the securities that they buy and sell at their own risk. OTC market has not a specific location. When the dealers have an opportunity, they sell the bond over the office counter to interested buyer.
Some advantages and disadvantages of raising funds in the bond market could be stressed. Some advantages are:
· Income: the bonds tend to be a more secure place to invest money than stocks. This could attract more investors.
· Rating: the bonds are subject to ratings systems. This allows investors to gauge how reliable a bond is expected to be.
· The bonds have steady and predetermined cash payments ending with a known repayment of principal.
· Bondholders take priority over stockholders when bond issuers happen to be insolvent.
· Refinance if interest rates improve.
· Possibility to exchange them for shares.
Some disadvantages are:
· Security: the bonds are only as good as the borrower's ability to pay the loans back.
· Liability in paying regularly interest payments and returning principal at a determined date.
· The interest could be high.
Mutual fund is a good alternative for raising funds. They are organization with a huge expertise and skill managing money for investors. Usually they manage a huge amount of money coming from several investors; this gives better conditions to the funds dealing in the market than investors could obtain by themselves. The diversification in the inversions offers different risk that the investor could choose. However, this industry of making money with money presents risks for investors and borrowers. Such as in any business, there are companies that play at the limit of the regulations trying to achieve they goal of making money, and sometimes they cross the line. For borrowers also represent a serious problem because some mutual fund lend money to institutions or countries that they know is impossible to recover in a normal way; so, then they proceed with long legal disputes trying to recover the engaged money. As conclusion, I think it could be a good option or raising money through a mutual fund, but many conditions should be analysed before to choice the mutual fund.
Hedge funds could harm the market when the market has not appropriate regulations and control of these regulations. This kind of organization will increase in the world based on the increase of available money in the market. The problem becomes when some markets relax the regulations or controls of existing regulations and the hedge market could take an enormous advantage of that manipulating the market. As result, common people and poor countries will pay this affair.
The stock option for managers is a very good option. They receive compensation that it is more valuable according to the performance of the business that they are developing. This scheme looks as a auto-control or auto-insentive or auto-motivation increasing the profitability of the company. Again, regulations, controls and clear rules are necessaries avoiding manipulation or change of objectives based in the own manager goals.
The daily stock information for PCC should looks like:
· Volume (total number of shares traded today)
· High and Low
$12.25 and $11.52
· Net Change