Equity investment is the act of investing in and purchasing the equity of a company in order to participate in or control its business activities. It can occur in the publicly traded market, when a company is initiated or established, and when shares are transferred privately.
The motives of equity investment mainly include:
(1) Income, including dividends and capital gains.
(2) gain control over assets and gain benefits through adjustment, scheduling and appreciation of assets.
③ Participate in business decision-making, spread risks and find business opportunities.
(4) Adjust asset structure and increase current assets. This motivation often exists when investing in tradable shares. ⑤ Speculation in order to obtain the difference between the purchase price and the purchase price often exists when investing in tradable shares.
Equity investment usually means holding a company's stock for a long time (at least one year) or investing in a company for a long time, so as to control the investee, or exert a significant influence on the investee, or establish a close relationship with the investee to spread business risks.
If the products produced by the invested company are the raw materials needed by the invested enterprise, the price of this raw material fluctuates greatly in the market and the supply cannot be guaranteed. In this case, the investing enterprise can control or exert great influence on the invested entity through its shares, so that the raw materials needed for its production can be directly obtained from the invested entity, and the price is relatively stable, ensuring the smooth progress of its production and operation.
However, if the invested enterprise is in poor operating condition or goes into bankruptcy liquidation, the invested enterprise as a shareholder also needs to bear the corresponding investment losses. Equity investment usually has the characteristics of large investment, long investment cycle, high risk and great benefits to enterprises. The profit margin of equity investment is quite broad, one is the dividend of the enterprise, and the other is that once the enterprise goes public, it will have more generous returns. At the same time, you can also enjoy a series of preferential measures, such as rights issue and stock delivery.
Equity investment is divided into the following four types:
(1) Control right refers to the right to decide the financial and business policies of an enterprise, and thus obtain benefits from the business activities of the enterprise.
(2)*** has control, refers to the control of an economic activity according to the contract.
(3) Significant influence refers to having the right to participate in the decision-making of enterprise financial and operating policies, but not to decide these policies.
(4) No control, no control and no significant influence.