Selling an equity stake to outside investors can be an attractive option for rural telcos for many reasons. Companies sell equity to avoid the issuance of debt, offset debt already in place, create an acquisition currency, seed a business plan or growth project, address estate planning issues, and provide liquidity to existing shareholders. Once you decide to sell equity, choose whether to sell primary or secondary shares. Primary shares are newly issued shares of your company. Issuing these shares dilutes the equity ownership of current shareholders in proportion to the number of primary shares sold.
Companies use the proceeds from the sale of primary shares to grow the business.
The proceeds from secondary shares, however, do not benefit the business. Secondary shares are owned by existing shareholders seeking to monetize a portion of their holdings. The sale of secondary shares does not dilute the ownership of other shareholders, and the proceeds benefit only the original shareholder. Selling Public vs. Private Equity Selling equity in public markets is an option usually restricted to larger and well-established companies. They are generally traded by small brokerage firms.