Securities sold: Overview, definition, and example
What are securities sold?
"Securities sold" refers to the sale of financial instruments such as stocks, bonds, or other types of securities to investors. These securities are typically issued by companies, governments, or other entities to raise capital. When securities are sold, the buyer purchases a portion of ownership (in the case of stocks), debt (in the case of bonds), or other rights in the underlying entity. The sale of securities is usually governed by legal and regulatory requirements to ensure transparency and protect investors.
Why are securities sold important?
Securities sold are important because they provide a way for companies, governments, or organizations to raise funds for various purposes, such as expansion, paying off debt, or funding projects. For investors, purchasing securities offers an opportunity to earn a return through dividends, interest, or capital appreciation. The sale of securities also plays a critical role in the functioning of capital markets, providing liquidity and helping establish market prices for assets. For businesses and governments, selling securities is a key method of accessing capital without taking on debt from traditional lending sources.
Understanding securities sold through an example
Imagine a company that wants to expand its operations but needs additional funds. The company decides to issue 1,000 shares of stock at $50 per share. The shares are sold to investors, who now own a portion of the company. The company raises $50,000 from the sale of the securities, which it can use to finance its expansion. The investors who bought the shares may benefit if the company grows and the stock value increases, or they may receive dividends if the company distributes profits to shareholders.
In another example, a government issues bonds to finance a new infrastructure project. The bonds are sold to institutional and individual investors, who agree to lend the government a set amount of money for a specified period. In exchange, the government agrees to pay interest on the bonds and return the principal amount at the end of the term. The sale of these bonds allows the government to raise the necessary funds for the project.
An example of a securities sold clause
Here’s how a clause about securities sold might appear in a contract:
“The Company agrees to sell a total of 10,000 shares of its common stock at an offering price of $100 per share, to be issued to the investors as outlined in the Offering Memorandum. The proceeds from the sale of the securities will be used for the expansion of the Company’s operations.”
Conclusion
Securities sold are a critical aspect of the financial markets, allowing entities to raise capital by selling ownership stakes, debt instruments, or other financial products to investors. For businesses and governments, the sale of securities is a flexible way to access funding. For investors, purchasing securities offers opportunities for financial returns, though it also carries risks. Understanding the process and purpose of securities sold is essential for both those issuing securities and those investing in them.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.