How do public limited companies raise capital and finance their operations?

Public limited companies, often referred to as publicly traded companies or corporations, have several ways to raise capital and finance their operations. These companies issue shares to the public and are listed on stock exchanges, allowing individuals and institutional investors to buy and sell their shares. Here are some of the primary methods public limited companies use to raise capital and finance their operations:

1. Initial Public Offering (IPO): The most common way for a private company to become a public limited company is through an IPO. In an IPO, the company makes its shares available to the public for the first time. This process involves working with investment banks, underwriters, and regulatory authorities to set the initial share price and make the shares available for purchase by investors.
2. Secondary Offering: After the IPO, public companies can raise additional capital through secondary offerings. These offerings can take the form of a follow-on offering (issuing more shares) or a rights offering (offering existing shareholders the right to purchase more shares at a discounted price).
3. Debt Financing: Public limited companies can issue bonds or other debt securities to raise capital. Investors buy these bonds, and the company pays interest on them over time. Debt financing can be used for various purposes, such as expansion, acquisitions, or working capital needs.
4. Retained Earnings: Public companies often retain a portion of their profits as retained earnings. These retained earnings can be reinvested into the company for various purposes, including research and development, capital expenditures, and debt repayment.
5. Bank Loans and Credit Lines: Public companies can secure loans or lines of credit from banks and financial institutions. These loans provide short-term or long-term financing for various needs, such as operational expenses, working capital, or capital investments.
6. Venture Capital and Private Equity: In some cases, public companies may still seek investments from venture capitalists or private equity firms to fund specific projects or initiatives. While less common than with private companies, this can be a source of capital for public companies.
7. Sale of Assets: Public companies can sell non-core or underperforming assets to generate cash. This approach can help finance ongoing operations or strategic initiatives.
8. Dividend Reinvestment Plans (DRIPs): Some public companies offer DRIPs to shareholders, allowing them to reinvest their dividends into additional shares of the company's stock instead of receiving cash dividends. This helps the company raise capital and expand its shareholder base.
9. Joint Ventures and Partnerships: Public companies may form strategic partnerships or joint ventures with other companies, sharing resources, risks, and profits for specific projects or ventures.
10. Convertible Securities: Public companies may issue convertible securities, such as convertible bonds or preferred stock, which can be converted into common shares at a predetermined conversion price. This allows the company to raise capital initially through debt or preferred equity and potentially convert it into common equity later.
11. Grants and Subsidies: In certain industries or regions, public companies may be eligible for grants, subsidies, or incentives from government bodies or industry associations to support specific projects or initiatives.