How does a stake sale affect a company's stock price?
I've read an article about a company I'm planning to invest in is planning to sell a 20% stake of the company to an unnamed "strategic investor". Proceeds of the sale will be used to "to fund loan growth and meet higher capital requirements". It doesn't say in the article whether new shares will be created for this transaction. Is it normal for such transactions to create new outstanding shares? Regardless, how will this news affect the short-term and long-term price of the company's stock?
The news article regarding the stake sale can be read here.
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Is it normal for such transactions to create new outstanding shares?
Yes a company can create new shares or a Majority share holder can sell some of his stake or it can be a mix of both.
how will this news affect the short-term and long-term price of the company's stock?
This is opinion based and not apt for this site. It can be positive or negative depending on how the market reacts to the news.
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