#21
Coryls - buy owning the share you are reducing supply, so price will be higher than it otherwise would, issuing shares is one method of raising funds, without taking on debt, so it supports the business

#22



Coryls - buy owning the share you are reducing supply, so price will be higher than it otherwise would, issuing shares is one method of raising funds, without taking on debt, so it supports the business
Originally posted by MatthewAinsworth


Issuing capital to investors in a fund raising is not cost free for a business and its existing investors, even ignoring the direct operational and legal costs of doing it.



In fact rewarding a bank for lending you £10000 by paying them 5% a year on a loan is pretty cheap, the £500 a year is a running cost and saves you £100 on your corporation tax due to having lower taxable profits - so it only costs the company (and therefore the owners of the company) £400 really.



Whereas issuing £10000 of capital to a new investor can be expensive because that new investor might demand 5% in dividends (which costs £500 with no tax shield) and the new investor also gets a slice of all future profits no matter how high they are and he gets a share of the company's assets on a winding up no matter how valuable they are.



So, many companies do not want to issue new shares to new investors to support their business, if they are doing fine already and not seeking new money in the capital markets. As such, you buying a second-hand share in their company today, temporarily pushing the price up now but forgotten about later, does not inherently "support" them in financial terms, or allow them to take on new employees.

#23
Bowl - good point, I think there must come a point when a company bond would be a higher rate, I see adverts for 8% bonds sometimes, I suppose depending on credit quality or ability to borrow. For companies to decide to float at all they must believe that they'd pay less in dividend or not be able to borrow enough. With dividends they aren't obliged.

#24
£33000 of revenue = one minimum wage job. So the investment required to create the job will be whatever it takes to create £33,000 of revenue. This can vary wildly based on the industry and the age of the organisation, but for an organisation that you can invest in easily, I'd expect the investment needed would be about 20% of the salary, so say £2500. Bear in mind that a job paying minimum wage probably isn't creating a lot of value (the value created will about 2 x the salary at the level of the minimum wage).

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