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Vessel of Honor

why do companies issue shares at premium

Globally Interested:

When underwriters determine the public offering price, they look at a number of factors. Some of these include the company's financial statements (how profitable it is), public trends, growth rates and even investor confidence.

The new shares are usually issued at a discount to the current selling price. Otherwise, they would not be able to sell them. You certainly would not pay $11 per share if you could buy it on the open market for $10.

Often, however, after the shares are sold the price drops below the issued price, making it seem as though they were sold at a premium.

When underwriters determine the public offering price, they look at a number of factors. Some of these include the company's financial statements (how profitable it is), public trends, growth rates and even investor confidence.

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