Equity and Debt
There are many methods and strategies that companies use to raise capital today. Some of the most popular ways are by selling equity in the company, i.e. selling an ownership stake, or issuing debt securities, i.e. taking a loan.
Equity offerings relate to a company selling some form of ownership along with rights in return for the investment capital. Such forms of equity include stock or common shares, units, shares, warrants and others. In relation to ISIN codes equity securities also can be assigned such identifiers for clearing and settlement needs, or plain identification purposes. For publicly traded companies it is often that equity is sold to investors instead of debt.
Debt securities offered in a debt offering relate to when a company sells a note or a bond. Basically a debt is much like a ‘promise’ in that the company issuing the debt promises to pay back the investor both his/her initial capital investment at maturity and other payouts at a specified time, possibly yearly or bi-yearly or monthly interest payments. Unlike equity offerings, debt issuance does not give company ownership over to the investor. Instead investors are essentially promised a payout and their money back at a specified and agreed time. When choosing either to offer debt or equity, considerations like the valuation, long term plan of action, additional capital raises down the road and more will need to be considered.
Equity vs. Debt
When deciding which type of structure to offer to investors it is important to keep in mind factors that will affect the company both short term and long term. For example, initially most companies raising money for their business will need to offer equity in their company simply because they do not have a tested or robust product or service that investors will want to take on debt for. Debt is normally issued by companies who do not have to give up equity in their business because they are in a stronger position then when they needed either seed or growth capital for the equity.
ISINs and Securities Identifiers for Debt and Equity
ISIN codes or other securities identifiers like CUSIPs or SEDOLs can be assigned to both debt and equity issuance. Whether you are seeking to sell common stock, or a hedge fund is selling share classes for their Cayman fund, or if you decide to issue a note or bond, an ISIN or other identifier can be assigned by applying for the codes. Let us know what you need and we will be happy to assist.