Companies can rely on various approaches to raise capital, and the issuance of equities is among them. This strategy implies that an organization receives financial resources by selling shares of the business. In general, the process is rather straightforward and implies that owners of 100% of the shares can decide to sell a particular portion of this entire equity in return for money. They establish the cost of an individual share, and investors obtain an opportunity to purchase these shares. This approach implies some advantages and disadvantages that should deserve attention. On the one hand, equity financing is beneficial because it helps organizations sponsor their growth and massive expansion (Dowling et al., 2019). This strategy is popular since it does not create any additional financial burden, which allows organizations to rely on it to reduce their debt (Allotti et al., 2021). On the other hand, equity financing is disadvantageous because companies lose their equity, independence, and profits since external shareholders never reckon on dividends (Belo et al., 2019). When investors buy shares, they obtain control over organizational performance and how value is created.
Every organization should carefully analyze its situation to decide whether equity financing is a suitable strategy. For AT&T, I do not think that this capital-raising approach is needed. The organization is rather successful, and it is not stated that the business has huge debt or plans to undertake a massive expansion. The company’s current financial health is good, which denotes that AT&T deals with sufficient financial resources to sponsor its stable growth and the implementation of innovations. That is why there is no evidence to claim that equity financing will be a suitable and advantageous decision for AT&T.
References
Allotti, V., Bianchi, M., & Thomadakis, A. (2021). How (more) equity financing for SMEs can become reality. European Capital Markets Institute, 1-12.
Belo, F., Lin, X., & Yang, F. (2019). External equity financing shocks, financial flows, and asset prices. The Review of Financial Studies, 32(9), 3500-3543. Web.
Dowling, M., O’gorman, C., Puncheva, P., & Vanwalleghem, D. (2019). Trust and SME attitudes towards equity financing across Europe. Journal of World Business, 54(6), 101003. Web.