Forms of stock issuance plays an important role in capital mobilization. Learn more about Methods of issuing shares, benefits and risks.
1. Introduction to forms of stock issuance
In the stock market, forms of stock issuance is an important factor that helps businesses raise capital to develop their business.
Clearly understand How to issue shares will help investors make reasonable decisions. So what are the forms of issuing common stocks? What are their characteristics? This article will analyze each issuance method in detail, providing example of stock issuance reality to help investors have a clearer perspective.
2. Common forms of stock issuance
2.1 Initial Public Offering (IPO)
IPO (Initial Public Offering) is the process by which a company issues its shares to the public for the first time to raise capital. This is one of the most important ways for a company to expand its scale and increase the liquidity of its shares.
Trends and figures
According to Investopedia, in 2024, companies in the United States raised more than $41 billion through IPOs, marking the most successful year since 2021.
Benefits of IPO
- Large capital raising: Businesses can attract millions or even billions of dollars to fund new projects.
- Increased reputation and brand: A listed company has higher transparency, attracting the attention of many investors.
- Create opportunities for individual investors: Investors can own shares of the company at the original price.
Risks of IPO
- High Cost: IPOs require extensive preparation, time and expense to meet legal requirements.
- Pressure for financial disclosure: Companies must publish financial reports regularly, subject to the supervision of shareholders and regulatory agencies.
2.2 Individual release
Private placement is the sale of shares to a few strategic investors instead of to the general public. This is one of the forms of stock issuance Often chosen by companies when they do not want to conduct an IPO.
Benefit
- Simpler procedure than IPO: No need for extensive financial disclosure like IPO.
- Create strategic partnerships: Usually done with large investment funds or strong financial institutions.
Risk
- Low liquidity: Stocks are not traded on a stock exchange.
- Potential dilution of shares: If a large number of shares are issued, the current value of the shares may be reduced.
2.3 Issuance of preferred shares
Issuance of preferred stock is a form of issuance for specific investors or groups of investors with special rights.
In 2024, FPT Corporation will continue to implement the employee stock option plan (ESOP) to honor and encourage employees with outstanding contributions in 2023.
Benefit
- Attracting large investors: Preferred shares help the company attract strategic investors.
- Increased stability: Preferred stock holders typically receive a fixed dividend.
- Payment priority: When a company dissolves, preferred shareholders will receive their capital back before common shareholders.
Risk
- Restricted voting rights: Preferred stock holders generally do not have voting rights at shareholders' meetings.
- Less opportunity for investment appreciation: Preferred stocks are generally less volatile than common stocks.
2.4 Issuance of bonus shares
Issuing bonus shares is a method by which a business distributes new shares to existing shareholders based on their current ownership ratio without requiring them to contribute additional capital.
Benefit
- No impact on business cash flow: The company does not have to spend cash to pay dividends but can still reward shares to shareholders.
- Increased liquidity: As the number of shares outstanding increases, the liquidity of the stock also improves.
- Attracting long-term investors: Issuing bonus shares helps maintain shareholder loyalty.
Risk
- Dilution of stock value: As the number of shares increases, the stock price may be adjusted down accordingly.
- No immediate return: Shareholders only receive additional shares, not cash.
2.5 Issuing shares to pay dividends
This form is applied when instead of paying cash dividends, a business will issue additional shares to distribute to shareholders.
In 2025, the Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank) issued shares to pay dividends at a rate of 49.5%, helping to increase charter capital and strengthen its financial foundation.
Benefit
- Helps businesses retain capital: The company does not have to pay cash but can still meet shareholders' interests.
- Increase outstanding shares: This helps increase shareholder participation in the company.
- Create opportunities for stock value growth: As the company grows, the price of newly issued shares can increase in value over time.
Risk
- Not suitable for investors who need immediate income: Shareholders do not receive cash to use but must sell shares if they need money.
- Share price may decrease: When additional shares are issued, the value of each share may decrease if earnings do not increase accordingly.
3. Forms of common stock issuance
Forms of common stock issuance are methods that businesses use to raise capital or optimize their financial structure without necessarily having to conduct an IPO. Below are some common forms.
3.1 Issuing new shares to existing shareholders
Issuing new shares to existing shareholders is a way for a company to provide additional shares to current shareholders at a certain rate.
Nam A Bank will issue preferential shares under the employee stock option program (ESOP) to increase charter capital in 2024. This is to implement the bank's strategic development orientation to 2025, with a vision to 2030, and to improve financial capacity to meet business development and risk management requirements.
Benefit
- Help businesses raise capital quickly without having to look for new investors.
- Existing shareholders have the opportunity to buy additional shares at a preferential price, retaining control of the company.
Risk
- If shareholders do not buy additional shares, their ownership percentage may be diluted.
- Stock prices may fall due to increased supply of shares in the market.
3.2 Issuing ESOP shares to employees
Issuing shares under the ESOP (Employee Stock Ownership Plan) program is a way for businesses to reward employees with shares or sell them at a preferential price.
In 2025, the Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank) issued shares to pay dividends at a rate of 49.5%, helping to increase charter capital and strengthen its financial foundation.
Benefit
- Motivate employees and retain talent.
- Contribute to improving work performance when employees have the right to own company shares.
Risk
- If too many are issued, the stock price may be diluted.
- Employees can sell shares as soon as they receive them, increasing selling pressure in the market.
3.3 Private offering of shares
A private offering is a way for a company to sell shares to a few strategic investors instead of to the general public.
Benefit
- Attract investment capital from strategic investors.
- Reduces the pressure from financial disclosures like IPOs.
Risk
- Limit the number of investors who can access the stock.
- Stock prices may be undervalued due to lack of competition from many investors.
4. Forms of securities issuance
In addition to issuing shares, businesses have many ways to raise capital through different forms of securities issuance. Here are some common forms:
4.1 Issuance of corporate bonds
Issuing corporate bonds is a form of capital mobilization by selling bonds to investors, with a commitment to pay fixed interest rates and repay the principal upon maturity.
In April 2024, Vingroup issued two bonds with a total value of VND 4,000 billion, a term of 2 years and an interest rate of 12.5%/year.
Benefit
- Raise capital quickly at a lower cost than stocks.
- Does not dilute ownership of existing shareholders.
- Fixed interest rates help businesses easily estimate financial costs.
Risk
- Businesses are obligated to make periodic interest payments, regardless of business performance.
- If unable to pay, the business may face bankruptcy.
4.2 Issuance of warrants
A warrant is a type of security that gives the holder the right (but not the obligation) to buy shares of the issuing company at a predetermined price in the future.
CMWG1901 Warrant: This is a call warrant issued by HSC Securities Company, with the underlying asset being MWG shares. The warrant code is structured as follows:
- C: Call
- MWG: The underlying stock code is MWG
- 19: Release year 2019
- 01: First release of the year
Benefit
- Investors can buy shares at a discounted price in the future.
- The company raises capital without immediately issuing new shares.
Risk
- If the stock price falls below the strike price, the warrant may become worthless.
- The company may have to issue additional shares when the warrants are exercised, diluting the value of existing shares.
4.3 Issuance of ETF (Exchange-Traded Fund)
Fund management companies can raise capital through the issuance of ETF certificates, helping investors access a diverse portfolio of stocks at low cost.
VFMVN30 ETF is one of the largest ETFs in Vietnam, simulating the VN30 index and attracting thousands of billions of VND in investment capital each year.
Benefit
- Helps investors easily invest in a basket of stocks without having to buy each code individually.
- Increase liquidity for the stock market.
- Reduce risk by diversifying your portfolio.
Risk
- Fund certificate values may fluctuate widely with the market.
- Returns depend on the performance of the fund portfolio.
4.4 Issuance of convertible bonds
Convertible bonds are bonds that can be converted into shares of the issuing company at a fixed rate.
In 2025, SBT plans to issue 5 million convertible bonds (VND 500 billion) to existing shareholders, at a ratio of 16,291/100. The bonds can be converted into common shares upon maturity, to increase capital, invest in new projects and restructure debt.
Benefit
- Investors have the opportunity to enjoy fixed interest rates and potential stock price appreciation.
- Businesses raise capital at lower interest rates than with conventional bonds.
Risk
- If the stock price falls, investors may not want to convert the bonds into stock.
- Dilution of shares when large amount of bonds are converted into shares.
4.5 Issuance of derivative securities
Derivative securities are financial instruments such as futures contracts, options, traded on the stock market for the purpose of hedging or speculation.
The Hanoi Stock Exchange (HNX) has developed a derivatives market with VN30 index futures contracts, attracting large trading volumes from institutional investors.
Benefit
- Allows investors to protect their portfolios against market volatility.
- Create profit opportunities from price fluctuations in the market.
Risk
- Strong price fluctuations can lead to large losses if risk is not managed properly.
- Margin requirements, which may result in insolvency if insufficient funds are available.
5. Conclusion
The choice forms of stock issuance Appropriateness plays an important role in the development of enterprises and the interests of investors. According to the current trend, IPO and private issuance are still the two most popular methods, helping enterprises access large capital sources and expand business operations.
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