What is a General Public Distribution
A general public distribution is a type of primary market offering in which the securities being issued are available to anyone who has the ability to purchase them. This differs from conventional public distributions of securities in which underwriting investment banks sell large blocks of the issued securities to large investors.
BREAKING DOWN General Public Distribution
If you take part in a general public distribution of securities, you are participating in what is called the primary market: You are buying securities directly from the issuing company, and your funds go to it to finance its business activities. This is in contrast to the secondary market, where investors buy and sell securities from each other, with funds moving back and forth from investor to investor without involving the underlying company at all. The process by which a company makes it shares available for sale to the public is known as going public, and it is used to convert a company from a private firm, or one with no general shareholders, to a public firm, or one with general shareholders.
Why Companies Offer General Public Distributions
Companies usually offer shares to the general public and other investors in order to raise capital to fund expansion, build new facilities, hire new employees, research and develop new products, and buy more equipment. Each share a company sells represents partial ownership of that company. The method of raising money by selling shares through a general public distribution or other primary market is known as equity financing and differs from selling bonds or derivatives.
Advantages of a General Public Distribution
A primary advantage of selling shares on the primary market is that investors’ money goes directly to the company issuing the shares, rather than to another investor selling the shares, as it would on the secondary market. Early private investors may also monetize some or all of their investment in a company by offering their shares as part of the initial public offering (IPO).
A general public distribution allows a company to raise a large amount of money from investors in the marketplace. This can help it diversify and grow its equity base, give it access to cheaper capital, enhance its brand and public image, and help it attract and retain better talent. A general public distribution allows companies to exercise more financing options by making them more attractive candidates for bank loans, and it can smooth the acquisitions process.