The Process of Raising Capital

Looking back at figure 7.2, we note four financing transitions, where the source of funding for a firm is changed by the introduction of a new financing choice. The first occurs when a private firm approaches a private equity investor or venture capitalist for new financing. The second occurs when a private firm decides to offer its equity to financial markets and become a publicly traded firm. The third takes place when a publicly traded firm decides to revisit equity markets to raise more equity. The fourth occurs when a publicly traded firms decides to raise debt from financial markets by issuing bonds. In this section, we examine the process of making each of these transitions. Since the processes for making seasoned equity and bond issues are very similar, we will consider them together.

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