Equity investment is a form of long-term investment into the share of a company by purchasing the share of such company. Equity investment stems from the fact that companies need fund either to develop and establish their business, or to diversify and expand their business. The invested money is returned once the shares are sold to another investor.
The investor in equity can be individuals or firms who want to maximize their wealth. By purchasing the stock of a company, the interests of the investor and the invested company align, and the return of the investor is proportional to the profits and losses of the company. This is one of the deciding differences between equity and debt investment.
An advantage of equity investments is the diverse portfolio and types of investments offered.
Common share: this share imposes a medium to very high risks and allows the investor to earn voting rights in the invested entity. The return for this investment is in dividends and capital gains or losses.
Preferred share: investor earns a fixed dividend which may be deducted or suspended depending on the operation result of the company to preserve its capital. One of the highlights of preferred equity is that in case the business dissolves, the holder of preferred share has the right to the portion of the remaining assets after tax authorities, employees, debt lender but ahead of common shareholders.
Restricted voting shares: this kind of share is quite similar to common share, but minus the voting rights as its name suggested.
Rights and warrants: shareholder of this investment can only earn return from capital gains. They are special as they are only available during a certain period at a determined price, and are usually offered to investors in conjunction with the sale of another security, such as common share.
For further advice and information on equity investment and attractive equity projects, please do not hesitate to contact us.