Issues of shares Flashcards
(98 cards)
1
Q
A full listing requires _____ of shares to be in public hands, and a _______trading record is required.
A
A full listing requires 25% of shares to be in public hands, and a three-year trading record is required.
2
Q
Companies choose to incur the costs of obtaining and maintaining a quotation to
A
raise capital, make it easier to raise further capital in the future, give existing shareholders an exit route, and make the shares more marketable and easy to value.
3
Q
The possible disadvantages of obtaining a quotation are that it is
A
expensive and time-consuming, there may be additional disclosure requirements, regulation, and accounting standards to comply with, original owners have no control over the future owners of the company, and a takeover bid is possible.
4
Q
The main methods of obtaining a quotation are
A
offer for sale at a fixed price, offer for sale by tender, offer for sale by subscription, placing, and introduction.
5
Q
__________is the usual method for obtaining a stock exchange quotation while also raising new money.
A
Offer for sale
6
Q
We have just described various reasons why a company might obtain a quotation. List the
possible disadvantages of doing s
A
Solution
Possible disadvantages:
Obtaining a quotation is expensive and time-consuming.
There may be additional disclosure requirements, regulation and accounting standards to
comply with.
Original owners have no control over the future owners of the company.
A takeover bid is possible.
7
Q
In an offer for sale at a fixed price, a predetermined number of shares (or other securities) is offered to the general public at a
A
specified price via an issuing house
8
Q
Companies that are already quoted are almost exclusively used other than
A
offers for sale.
9
Q
An offer for sale by tender is similar to an offer
A
for sale at a fixed price.
10
Q
(offer for sale by tender) Instead of inviting applications at a specified price, members of the public are invited to
A
submit a tender stating the number of shares they want to buy and the price they are willing to pay.
11
Q
The prospectus gives a _______, but investors determine how much to _______.
A
The prospectus gives a minimum price, but investors determine how much to bid.
12
Q
The issuing house determines a single strike price,
A
which may be the highest price at which all the stock can be allocated.
13
Q
All successful applicants pay the___________, regardless of how much more they had bid
A
strike price
14
Q
The allocation process for an offer for sale by tender is more complex and can produce
A
a more concentrated ownership of the shares.
15
Q
All investors who bid below the strike price in the event of the offer being oversubscribed _______
A
receive no shares at all.
16
Q
Concessionary methods of obtaining a listing:
The Stock Exchange allows alternative new issue methods to be used in some circumstances.
Offer for subscription is similar
A
to offers for sale, but the whole issue is not underwritten.
17
Q
In an offer for subscription, the company sells shares
A
directly to the public, and the issuing company bears at least part of the risk of undersubscription.
18
Q
Sometimes offers for subscription are used for
A
unusual issues or launches of investment trusts.
18
Q
Sometimes offers for subscription are used for
A
unusual issues or launches of investment trusts.
19
Q
Placings are a simpler, cheaper method of making small issues, where the issuing house
A
buys the securities from the company and individually approaches institutional investors directly.
20
Q
Smaller investors dislike placings because
A
they are not able to buy the shares.
21
Q
Introductions can be used in several circumstances, such as
A
where an overseas company wants a UK Stock Exchange listing or where an already listed company wants to de-merge into two or more separate companies.
22
Q
Underwriting is always used for
A
an offer for sale.
23
Q
An underwriter agrees to take on the risk of any unsold shares, so the issuing company is
A
guaranteed to raise a certain amount of capital.
24
The underwriter may form a syndicate of other underwriters
to spread the risk.
25
The underwriter ________ for the underwriting service.
charges a fee
26
Underwriting provides ____________for the issuer and the investors, but it can be expensive.
Underwriting provides certainty for the issuer and the investors, but it can be expensive.
27
Question
List the main methods by which a company can obtain a listing on the Stock Exchange.
Solution
The main methods are:
1. offer for sale at a fixed price
2. offer for sale by tender
3. offer for subscription
4. placing
5. introduction.
28
Question
In each of the following multiple-choice questions, either one or two of these options is correct:
I offer for sale
II offer for subscription
III introduction
In each case answer the question using the following code:
A if I and II only are correct
B if II and III only are correct
C if I only is correct
D if III only is correct
(i) Which may be at either a fixed price, or by tender?
(ii) Which raise new money?
(iii) Which involve the sale of shares to an issuing house?
(iv) Which does not involve the sale of shares?
(v) Which is cheapest for the company?
(vi) Which is most expensive for the company?
(i) A
(ii) A
(iii) C
(iv) D
(v) D
(vi) C
29
If shareholders waive their pre-emptive rights, companies can
use a placing to raise additional capital.
30
Companies can increase the number of shares without raising new money by issuing new shares to existing shareholders in proportion to their existing shareholdings, which is called a
scrip issue.
31
Companies wanting to raise new loan or preference share capital can use
a placing, an offer for sale or for subscription.
32
When an existing shareholder wants to sell a large block of shares, __________ is made instead of selling the shares on the market.
an offer for sale
33
Rights Issues
Introduction
Companies must offer new shares to existing shareholders when they want to raise more)______
capital.
34
A rights issue is where
a company offers further shares, at a given price, to existing shareholders in proportion to their existing holdings.
35
The price is at a discount to the current share price to make it .
more attractive
36
The main effects of a successful rights issue are
that new shares are created, new money is raised, the total value of the company should increase, and the price per share will fall.
37
Companies have various reasons for needing more money, such as to reduce the ratio
of debt to equity capital, finance an expansionary investment program, or pay for the purchase of another company.
38
The stock market’s reaction to individual rights issues will depend on the
reasons for the issue.
39
Timetable for a Rights Issue
A few weeks before the rights issue, the company discusses the possibility
of an issue with its advisers.
40
Companies often like to have a rights issue when the stock market is
high.
41
The company will publish a rights offer document, explaining
why the rights issue is being made.
42
Shareholders are sent provisional allotment letters, and the shares start to
trade ex-rights.
43
Shareholders are given three or more weeks to
accept the offer or sell their nil-paid rights.
44
Market capitalisation is
the total value of a company's outstanding shares.
45
The share price before a rights issue is given by
market capitalisation divided by the number of shares
46
The price per share after a rights issue is the original market capitalisation plus
the extra value divided by the total new number of shares. CT2 P.152 FORMULAS
.
47
The extra value component includes the
amount of new money raised by the rights issue, the expenses of the issue, and the change in value based on the market's revised perception of the company and the use to which the money is being put
48
Estimate the theoretical ex-rights share price in each of the following cases:
1. Current price: 250p
Offer price: 150p
Basis: 1-for-1
2. Current price: 250p
Offer price: 150p
Basis: 1-for-3
3. Current price: 250p
Offer price: 150p
Basis: 1-for-10
Solution
In each case, we equate what the investor starts out with (ie m shares worth 250p plus some
money) to what they end up with (ie m+n shares worth the new price).
Let the theoretical ex-rights share price be P.
1. 2P = 250 + 150
P = 200
2. 4P = 250 3 + 150
= 900
P = 225
3. 11P = 250 10 + 150
= 2650
P = 241
49
Question
Describe the impact on the statement of financial position of the company making the first rights
issue in the previous question. Assume that the cash raised from the issue will be held in cash
(which appears in current assets in the statement of financial position). Before the rights issue, its
statement of financial position appeared as follows:
£m
Non-current assets 250
Current assets 100
350
Reserves 200
25p ordinary shares 150
350
Solution
Current number of 25p shares = 600m
Number of new shares issued = 600m
Nominal value of new shares = £150m
Cash raised = £900m
Expenses involved in rights issue unspecified.
Effect:
Current assets increase by £900m less expenses
Ordinary share capital increases by £150m
Reserves (ie share premium account) increases by £750m less expenses
If we ignore expenses, the new statement of financial position will look like this:
£m
Non-current assets 250
Current assets 1,000
1,250
Reserves 950
25p ordinary shares 300
1,250
50
Shareholders who have cash and want to increase their exposure to the company can take up the rights by
spending the required amount to buy new shares at a discounted price.
51
Shareholders who don't want to spend cash or don't want to increase their exposure to the company can
sell their nil-paid rights
52
The theoretical market value of the nil-paid right is the difference between
the ex-rights share price and the rights issue price, which compensates the shareholder for the loss of value in the original holding.
53
How can Shareholders who want to maintain the value of their holding ensures that the value of their holding remains the same, without any net expenditure.
can sell some of their nil-paid rights to buy new shares at the discounted price. This
54
Shareholders who want to reduce their holding in the company can __________. This will result in a __________--
Shareholders who want to reduce their holding in the company can sell all their nil-paid rights to raise cash. This will result in a decrease in the market value of their holding by the amount raised through selling the rights.
55
Rights issues are usually offered at____________ unless something goes wrong
a discount to the market price,
56
If there is a collapse in the share price between the announcement date and the completion of the issue, the offer price
may no longer be at a discount to the market price. (formulas page. 165)
57
Most rights issues are underwritten,
which means that various institutions agree to buy all the shares.
58
Having an issue underwritten provides
assurance to shareholders that the issue will be completed even if not all shareholders take up their rights.
59
Scrip issues are sometimes called capitalization or bonus issues. It refers to
the process of a company issuing free shares to all ordinary shareholders proportionate to their existing holdings without any payment from shareholders.
60
A 1-for-2 scrip issue means that
for every two shares held, investors are given a free share.
61
Scrip issues create new shares, but
no money is raised. The fundamental value of the company remains unchanged. The price per share should fall in proportion to the increase in the number of shares. The total value of each investor's holding should be unchanged.
62
why the name capitalization issue in scrip issues .
The reserves of shareholders are converted to share capital, hence the name capitalization issue.
63
Scrip issues are a book-keeping exercise that helps improve
marketability by having more, lower-priced shares.
64
Scrip issues don't achieve much, and the arguments to support them are largely ___________
psychological.
65
Shareholders like the idea of being given extra shares free of charge, hence the name ______
bonus issue.
66
Scrip issues are associated with what companies
successful companies that have built up large reserves from retained profits.
67
Scrip issues are taken to imply _____and provide a __________factor for shareholders.
Scrip issues are taken to imply success and provide a positive psychological factor for shareholders.
68
The minimum price at which a rights issue can occur is the ______value of the shares, and rights issues must occur at a ________.
The minimum price at which a rights issue can occur is the par value of the shares, and rights issues must occur at a discount.
69
Scrip issues reduce the price of a ,
share
70
aving a scrip issue may reduce a company's.
ability to have a future rights issue if its share price declined following the scrip issue.Hence, if the directors decide to have a scrip issue, they must be confident about the company's prospects.
71
Investors who read this contorted logic into a scrip issue may view a scrip issue as a
sign of good news.
72
Some companies have a habit of having light scrip issues and subsequently
keeping the same dividend per share
73
( Impact on share price )an n-for-m scrip issue should reduce the share price from P to:
P*m/(m+n)
74
Calculate the theoretical share price after each of the following scrip issues:
1. Current price: 250p
Basis: 1-for-1
2. Current price: 250p
Basis: 1-for-3
3. Current price: 250p
Basis: 1-for-10
Solution
Again we equate what the investor starts out with (ie m shares worth 250p each) to what investors
end up with (ie m+n shares worth the new price).
Let the theoretical share price be P.
1. 2P = 250
P = 125
2. 4P = 250 3
P = 188
3. 11P = 250 10
P = 227
75
Scrip dividends
A scrip dividend means that a company pays shareholders a dividend by giving them new shares
rather than cash.
76
Scrip dividends can be an alternative to cash dividends when a company is facing
financial difficulties or wants to conserve cash
77
two cases on scrip dividends
everyone has to accept the scrip dividend: This is just like a scrip issue (companies use
scrip dividends of this type when they can’t afford to pay a cash dividend). Shareholders
end up with more shares worth less each.
there is a choice between a scrip dividend and a cash dividend: Unlike a scrip issue, the
scrip dividend option is worth as much as the cash dividend. Those investors that accept
the scrip dividend have more shares, but the market value of the shares will not have
been forced down. They have gained as much as if they had taken the cash. Really it is
like a normal dividend being paid followed by a rig
78
Which of the following could NOT result in a company obtaining a stock exchange listing?
A an introduction
B a rights issue
C an offer for subscription
D a placing [2
Answer = B
Rights issues are used by companies that already listed in order to raise further capital. The other
three method are used for obtaining a listing.
79
An arrangement whereby a company’s shares obtain a quotation on the London Stock Exchange,
and the shares that are made available are bought by a small number of institutional investors, is
known as:
A a placing.
B an offer for subscription.
C an introduction.
D an offer for sale. [2
Answer = A
All four are methods of obtaining a listing. A subscription and offer for sale are both offers made
to the public (directly by the company itself, or via an issuing house respectively). An introduction
does not make any shares available.
80
The main significance of the par value of an ordinary share is that:
A it is the minimum price at which shares can be traded on the Stock Exchange.
B it is the minimum price at which shares can be issued by the company.
C it is the amount at which the shares will be redeemed.
D at prices above the par value a company must have a scrip issue. [2]
The next two questions relate to Company XYZ. The statement of financial position of XYZ prior to
a rights issue is given below (all figures in £000s):
Non-current assets 400 Share capital 120
Current assets 100 (Ordinary shares of £1)
Other reserves 50
Retained earnings 330
500 500
The market price of the company’s shares is currently £7 per share.
Answer = B
A is the market price. C is wrong because shares are usually irredeemable. D is false because
companies do not have to have scrip issues.
81
If XYZ has a 1-for-3 rights issue at £5, the expected ex-rights price of the shares will be:
A £7.00
B £6.50
C £5.50
D £5.00 [2
Answer = B
The ex-rights price will be given by:
Price
=3 *7+ 1* 5/(3+1)
£6.50
82
Following the rights issue, XYZ’s other reserves will be:
A £330,000
B £250,000
C £210,000
D £50,000 [2
Answer = C
XYZ will issue 40,000 new shares in a 1-for-3 rights issue (there are 120,000 shares to start with).
The amount that will be transferred to the other reserves will be:
(the number of shares issued) (the amount above the par value)
= 40,000 £4 = £160,000
This will be added to the £50,000 that exists already in this account.
83
Explain the role of the underwriters of a share issue. [5
Underwriting is a form of insurance against the risk of an unsuccessful issue. [1]
The company sells all the shares at an agreed price to the issuing house, which as lead
underwriter, agrees to take up any shares that are not subscribed for by the public. [1]
The issuing house will not usually want to retain the entire risk, therefore the lead underwriter
will often arrange for sub-underwriters (usually big financial institutions) to become involved. [1]
However, the lead underwriter is still responsible if a sub-underwriter defaults. [1]
In return for underwriting the share issue, the company will pay the issuing house a fee. In the
case of an offer for sale, the fee can be included in the difference between the price at which the
shares are sold to the issuing house and the price at which they are sold to the public. [1]Page 32 CB1-05: Issue of shares
© IFE: 2019 Examinations The Actuarial Education Company
If the share issue is fully subscribed, the underwriters make a profit equal to the fee less their
expenses. [1]
If the issue is undersubscribed, the underwriters are left with the surplus shares. They will sell
these in the market at a later date. [1]
[Maximum 5]
84
Piron plc is a large manufacturing company that produces electronic products for the world
market and has branches in Europe and Asia. It is financed by a mixture of equity and debt
finance. The company now wishes to expand its range of products and needs further funds for
investment. The directors are considering the various financial options open to the company.
(i) One of the options being considered is a rights issue. Discuss the advantages and
disadvantages for Piron of undertaking a rights issue. [6]
(ii) The Finance Director has suggested that the company could issue Eurobonds. Discuss the
advantages and disadvantages of Eurobonds for Piron plc relative to other forms of
debt. [5]
(iii) List the other borrowing options available for Piron plc. [3]
(iv) Describe the factors the directors should consider when making their decision. [6]
(i) A rights issue
Advantages
The company receives new equity capital to finance its expansion plans. [1]
Equity finance is less risky for the company than debt finance as, unlike debt interest
payments, equity dividends are not a liability. [1]
Dividends are paid at the discretion of the directors. There is greater opportunity to
plough back profits into the business. Debt interest must be paid every year. [1]
The shares should be attractive to the shareholders since the business has good prospects
for the future. They should be able to be sold at only a slight discount to the current
share price. [1]
Disadvantages
The company will have to check that the total share capital after its proposed new issue
does not exceed its authorised share capital. [1]
The share price will fall. How far it falls depends on the extent of the discount, the
number of new shares issued, and the market view of the rights issue. [1]
The company will have to consider the cost of undertaking a rights issue, including
underwriting costs (if they choose to have the issue underwritten). [1]
Rights issues can take a long time to complete and require a lot of management time. [1]
There may be adverse shareholder reaction to the issue. Some shareholders may not be
able to afford to buy new shares at the time of the issue and will be disappointed to see
their control of the company diluted. [1]
[Maximum 6]CB1-05: Issue of shares Page 33
The Actuarial Education Company © IFE: 2019 Examinations
(ii) Eurobonds
Advantages
Eurobond issues attract investors from around the world. [1]
Eurobond issues do not come under the tax or legal jurisdiction of any country. This lack
of regulation keeps the cost of borrowing down and it may be lower than borrowing in
the debt markets of any one country. [1]
Eurobonds may be denominated in almost any currency. This would suit Piron plc, which
does business in Europe and Asia. [1]
Eurobonds are a convenient way of borrowing foreign currency without entering overseas
financial markets. [1]
There is no need to maintain a register of bond holders as Eurobonds are bearer. [1]
Disadvantages
The minimum acceptable sum to be raised by Eurobonds is $75 million. Piron plc may not
want to raise as much as this. [1]
Issues are arranged by a syndicate of investment banks. Piron plc will have to negotiate
the arrangements for the issue and the fee to be paid to the arranging banks. [1]
[Maximum 5]
(iii) Other options
The company could consider:
debentures
conventional unsecured loan stock
preference shares
convertible loan stock
convertible preference shares.
[1 mark per bullet point, maximum 3]Page 34 CB1-05: Issue of shares
© IFE: 2019 Examinations The Actuarial Education Company
(iv) Factors to consider
Before making its decision, Piron plc should consider the following:
the cost of raising the finance. The company should consider the initial issue cost, plus
the return that will have to be paid to the investors. [1]
the tax position. Interest on debt finance is tax deductible, whereas dividend payments
are not. [1]
the risk to the company. Interest on debt has to be paid, whereas dividends are paid at
the discretion of the directors. If Piron plc were to hit a bad patch, eg political unrest in a
country that it deals with, high interest payments could be very difficult to pay. [1]
the effect on control. Debt holders have no vote, but shareholders do, although if Piron
plc has many small shareholders at present this may not be of great concern to them. [1]
flexibility of finance. Share capital is usually irredeemable whereas debt is redeemable
and can be issued at various terms. [1]
the volatility of the markets at the present time. It is easier to issue shares or bonds into a
stable or rising market. [1]
the effect on the company’s statement of financial position. Too much debt can lead
shareholders to panic and sell the shares or debt covenants to be breached. [1]
assets held. If the company has few tangible assets, it is difficult to raise debt finance.
This is not likely to be a problem for Piron plc since it is a manufacturing company with a
substantial and increasing amount of capital equipment. [1
85
Underwriters are
investment banks or financial institutions that help companies go public by purchasing shares of the company at a discount and then reselling them to the public at a higher price.
86
what role do Underwriters typically play
a key role in helping companies determine the optimal offering price, structuring the offering, and marketing the shares to potential investors.
87
what role do Underwriters typically play
a key role in helping companies determine the optimal offering price, structuring the offering, and marketing the shares to potential investors.
88
Underwriters also help to manage the risk associated with an IPO. If the shares do not sell at the expected price, the underwriter is
Underwriters also help to manage the risk associated with an IPO. If the shares do not sell at the expected price, the underwriter is responsible for buying the unsold shares, which can result in significant financial losses for the underwriter. As a result, underwriters typically perform extensive due diligence on the company going public to assess the risk associated with the IPO.
89
Downside to underwriting
While it is possible to go public without underwriting services, the vast majority of companies choose to work with underwriters to help ensure a successful IPO. The underwriting process can be complex and time-consuming, but it can also provide companies with access to a broad range of investors and help to ensure a successful public offering.
90
Downside to underwriting
While it is possible to go public without underwriting services, the vast majority of companies choose to work with underwriters to help ensure a successful IPO. The underwriting process can be complex and time-consuming, but it can also provide companies with access to a broad range of investors and help to ensure a successful public offering.
91
whats a rights issue?
A rights issue is a type of corporate action in which a company offers existing shareholders the opportunity to purchase additional shares of the company's stock at a discounted price.
92
What's the purpose of a rights issue
The purpose of a rights issue is typically to raise capital for the company. Shareholders are given the right to purchase new shares in proportion to their existing holdings, and this is usually done at a price lower than the current market price.
The new shares are typically issued to the shareholders on a pro-rata basis, meaning that each shareholder has the opportunity to purchase a number of new shares that is proportional to their current ownership in the company.
The shareholders can either exercise their rights and purchase the new shares, or they can choose to sell their rights to someone else.
93
if I sell my rights as a shareholder how does the company benefit? does it mean the paid amount comes to me or goes to the company?
If you sell your rights as a shareholder, the company itself does not directly benefit. The money you receive from selling your rights goes to you, not the company.
However, by selling your rights, you are allowing someone else to purchase those rights and potentially increase their ownership stake in the company. This can provide additional capital to the company if the new shareholder decides to exercise their rights and purchase new shares.
Overall, selling your rights as a shareholder does not directly benefit the company, but it can indirectly benefit the company by potentially bringing in new investors and increasing the company's capital.
94
what happens when they choose to sell their rights to someone else.
When shareholders choose to sell their rights to someone else, they are essentially selling the opportunity to purchase new shares of the company at a discounted price to another investor. The investor who buys these rights from the original shareholder can then use them to buy new shares of the company at a discounted price, or they can choose to sell the rights to someone else.
The price at which the rights are sold is determined by market forces, and can fluctuate depending on a variety of factors such as the current market price of the company's shares, the expiration date of the rights, and the demand for the rights.
It's important to note that not all shareholders choose to sell their rights, and some may choose to exercise them and purchase new shares in the company. This can help the company raise additional capital and can also increase the shareholder's ownership stake in the company.
95
Equity finance is less risky for the company than debt finance explain
Equity financing is a way of raising capital by selling ownership shares in the company, such as common stock. Compared to debt financing, equity financing is generally considered less risky for a company due to the following reasons:
Advantages of Equity Financing:
* No fixed financial obligations: Equity financing does not create a fixed financial obligation that the company must repay within a specific timeframe.
* Flexibility in financial obligations: With equity financing, the company does not have a fixed repayment schedule or interest payments to make. This provides more flexibility in managing its financial obligations.
* Shared risk and losses: Equity investors bear the risk of the company's performance. If the company incurs losses or faces financial difficulties, equity investors share in the impact.
* Potential for long-term growth: Equity financing allows the company to raise funds without incurring debt. This can provide a stable financial foundation for long-term growth and expansion.
* Improved creditworthiness: By relying more on equity financing, a company can strengthen its balance sheet and improve its creditworthiness.
However, it's important to note that equity financing comes with its own considerations and potential drawbacks. Selling ownership shares in the company dilutes existing shareholders' stakes, and equity investors may expect a share of future profits or involvement in decision-making. Furthermore, equity financing may not be suitable for all companies or industries, and the availability of equity investors may vary based on market conditions[1][2].
96
break down the terms "company's equity"
Company's Equity:
Equity refers to the ownership interest in a company. It represents the residual interest in the company's assets after deducting its liabilities. In other words, equity represents the portion of the company's value that belongs to the owners or shareholders.
Equity can be calculated using the following formula:
Equity = Total Assets - Total Liabilities
It is important to note that equity represents the net worth of a company and is considered a key component of its financial structure. It can increase or decrease based on factors such as profitability, capital contributions, retained earnings, and changes in the value of assets and liabilities.
97
break down the terms "share capital"
Share Capital:
Share capital, also known as equity capital or paid-in capital, specifically refers to the funds raised by a company through the issuance of shares or ownership stakes. When a company is established or seeks to raise additional capital, it may offer shares to investors in exchange for their investment.
Share capital is divided into shares, and each share represents a unit of ownership in the company. The shareholders who hold these shares are entitled to certain rights, such as voting rights in shareholder meetings and a share in the company's profits (dividends) when distributed.
The amount of share capital is determined by the face value or nominal value assigned to each share. The face value multiplied by the number of shares issued represents the total share capital. For example, if a company issues 10,000 shares with a face value of $10 each, the share capital would be $100,000.
Share capital can be further classified into different types, such as:
Authorized Share Capital: The maximum amount of share capital that a company is legally authorized to issue.
Issued Share Capital: The portion of authorized share capital that has been actually issued and allotted to shareholders.
Subscribed Share Capital: The portion of issued share capital that shareholders have agreed to purchase.
Paid-up Share Capital: The amount of subscribed share capital that shareholders have paid for.
Overall, share capital represents the contributed funds from shareholders, which provides the initial capital base for the company and contributes to its equity.
