Initial Public Offering (IPO) - In the chapter we are provided with an example of the Industrial and Commercial Bank of China offering shares of their corporation to the public. The biggest pro of a firm based in Mexico taking this route, would be the gain of capital. A con that comes with this is a loss of control of your company. IF you were to lose majority control over your business, this could have potentially catastrophic impacts. The Global Bond Market - "Companies will issue international bonds if they believe it will lower their cost of capital" Foreign bonds - On the pro side of foreign bonds, the firm can raise capital in foreign currencies. This opens up more potential investors to the firm. A con of foreign bonds would be the exposure of foreign exchange risk. Foreign exchange risk can be risky, and if the Mexican peso depreciates significantly on the foreign exchange market, this could potentially crush the Mexican capital market. Eurobonds - Eurobonds are another and less risky option compared to foreign bonds. One pro of using Eurobonds would be the diversification of currencies. When a firm receives revenue in different currencies, it reduces the risk associated with exchange rates (with the use of hedging). You also get exposure for potential new investors, as well as a favorable tax status. One downside is that firms need to be careful of exchange rate transaction fees, diversifying currencies can be messy especially when you have to constantly pay fees to convert the cash. please help reply to this discussion
Initial Public Offering (IPO) - In the chapter we are provided with an example of the Industrial and Commercial Bank of China offering shares of their corporation to the public. The biggest pro of a firm based in Mexico taking this route, would be the gain of capital. A con that comes with this is a loss of control of your company. IF you were to lose majority control over your business, this could have potentially catastrophic impacts.
The Global Bond Market - "Companies will issue international bonds if they believe it will lower their cost of capital" Foreign bonds - On the pro side of foreign bonds, the firm can raise capital in foreign currencies. This opens up more potential investors to the firm. A con of foreign bonds would be the exposure of foreign exchange risk. Foreign exchange risk can be risky, and if the Mexican peso
Eurobonds - Eurobonds are another and less risky option compared to foreign bonds. One pro of using Eurobonds would be the diversification of currencies. When a firm receives revenue in different currencies, it reduces the risk associated with exchange rates (with the use of hedging). You also get exposure for potential new investors, as well as a favorable tax status. One downside is that firms need to be careful of exchange rate transaction fees, diversifying currencies can be messy especially when you have to constantly pay fees to convert the cash.
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