Below the issue price, it means that secondary market investors have lost money. In addition, the company's financing decreases, and the incentive for additional issuance or allotment becomes smaller, because the refinancing will also be lower than the issue price. At the same time, being lower than the issue price will also cause the exercise of equity incentives** to be lower than the market price, which will affect the enthusiasm of employees. In addition, for major shareholders who hold the company, a lower issue price will cause their pledge financing to appear a warning line or liquidation line, and they will be forced to increase collateral or replenish margin.
First of all, below the issue price means that secondary market investors have lost money. This is because when new shares are issued, they are usually priced at a certain premium rate to ensure that primary market investors receive a reasonable return. If the listing is not lower than the issue price, then secondary market investors will face a huge risk of loss. This would take a toll on investor confidence and could trigger a panic sell-off, further depressing stock prices.
Second, a lower than the issue price will affect the company's refinancing plan. When a company needs to refinance, they usually choose to issue additional shares** or a rights issue. However, if the share price is consistently below the issue price, then the company may face financing difficulties as they are unable to sell new at a reasonable price. This results in companies not being able to obtain sufficient funding to support their business development or achieve other strategic goals.
In addition, ** below the issue price will also affect the company's equity incentive plan. Many companies offer equity incentives to their employees to motivate them to work hard and improve company performance. However, if the share price is lower than the issue price, the exercise of the equity incentive** will be reduced accordingly. This may lead to employees exercising their rights early and reaping the benefits, which can reduce their loyalty to the company and their motivation to work.
For the majority shareholders who hold the company, the issue price below the issue price will also bring a series of problems. Majority shareholders usually pledge their holdings to banks or other financial institutions to obtain financing. If the stock price is lower than the issue price, then the warning line or liquidation line of the pledge financing will be touched, causing the major shareholder to be forced to increase the collateral or replenish the margin. This increases the pressure and burden on major shareholders and may trigger further share price** and pledge financing risks.
In summary, a lower issue price can have a range of negative impacts on the company, investors, employees and major shareholders. Therefore, investors should conduct sufficient market research and risk assessment when purchasing new shares to ensure that their investment decisions are wise and prudent. At the same time, companies should also take effective measures to boost stock prices and maintain market confidence.