0
$\begingroup$

Under the heading Why would a company issue unpaid shares? by Johnathan Korchak

Although unpaid and partly paid shares are far less common than fully paid shares, there are a number of reasons why a company might choose to issue them:

[...]

[second-last bullet] In line with a strategy to implement an acquisition or merger of companies.

Under the heading Why would I issue unpaid shares?

Companies may choose to issue partly-paid or unpaid shares for a variety of reasons, including:

[...]

[last bullet] As part of a strategy to implement a merger or acquisition.

$\endgroup$
2
$\begingroup$

Why would a company issue unpaid shares?

Possible reasons are:

  • buyer's temporary lack of sufficient funds to perform the acquisition, whence the issuer of shares is willing to grant credit for the sake of "closing the sale";
  • fiscal planning (be it the buyer's and/or the issuer's planning) might be such that delaying payment of shares will place him at a more convenient tax bracket in the acquisition and/or disbursement fiscal year(s) (this is more evident in cash based accounting systems), and/or the delay of payment will allow him to qualify for certain tax deductions;
  • issuer predicts the price of shares will fall (and possibly discourage prospects of merger/acquisition), so he hedges against that risk by entering a forward contract with the buyer, with the incentive --to the buyer-- that transfer of shares will be effective immediately;
  • buyer is willing to commit to a higher price on unpaid shares so as to anticipate upcoming legislation that will make it harder to perform akin mergers/acquisitions.
$\endgroup$

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.