Public Limited Company

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Gap was established in 1969. Gap is a PLC (Public Limited Company). Gap is part of Gap Inc, which contains of three companies that have joined to make the company Gap Inc and they are Gap, Banana Republic and Old Navy. Gap Inc operates in 6 different countries around the world. Gap Inc has Gap stores in 6 countries, which are the United States, United Kingdom, Canada, France, Japan and Germany, but there are only Banana Republic and Old Navy stores in the United States and Canada. At the end of 2001 Gap Inc had a total of 4,171 stores of which 2932 stores are Gap stores, 441 stores are Banana Republic, and 798 stores are Old Navy.

A PLC company has shares on the stock exchange so the public can buy their shares. Companies can go to the ‘full quotation’ on the Stock Exchange so their share prices appear on the dealers’ visual display screens. Gap’s shares on 26th January where valued at $14.69. This graph below shows how Gaps shares have performed in the past year. At the end of January and beginning of February, Gaps share price was about $14.70 an they had about sold about 7 million shares, but then at the beginning of March there price dropped down to about $11.70 and suddenly they sold about 35 million shares.

This also happened in the middle of May when Gaps share price fell again and then they sold about 40 million shares and this was the highest amount of shares Gap sold in 2002. Their lowest time in the year was at the end of December when they had only sold about 3 million shares. Gap’s highest share price in 2002 was in the middle of May when it was worth about $17.00. Their lowest share price was at the beginning of October when it was worth about $8.00.

The main advantage of selling shares through the stock exchange is that large amounts of capital can be raised very quickly. One disadvantage is that the original shareholders can lose control of a business if large quantities of shares are purchased as part of a take-over bid. It is also expensive to have shares quoted on the Stock Exchange.

To create a PLC, the directors must apply to the Stock Exchange Council, which carefully check the accounts. A business wanting to go public will then arrange for one of the merchant banks to handle the paperwork. Selling shares is a risky business. The Stock Exchange has good days when lots of people buy shares and bad days when lots of people sell shares. If the issue of new shares coincides with a bad day, a company can find itself in difficulties.

For example, if a company hopes to sell a million new shares at �1 each and all goes well then, it will raise �1 million; but on a bad day it might be able to sell only half of its shares at this price. There is luck on how many shares you sell, therefore, in getting the day just right to launch new shares because the date has to be chosen well in advance. Some companies are unlucky as they launch their shares on the wrong day when people are selling their shares and not buying any.

One way around this problem is to arrange a ‘placing’ with a merchant bank. The bank recommends the company’s shares to some of the share-buying institutions with which it deals (pension funds and insurance companies for example), who then may agree to buy, say, one-tenth of the new shares. In this way the merchant bank makes sure the shares are placed with large investors before the actual date of issue comes round, then even if it is a bad day on the Stock Exchange when the shares are issued, the company’s money is secure.

Another common method by which public companies raise share capital is by offering new shares for sale to the general public. The company’s shares are advertised in leading newspapers and the public invited to buy the shares. When a company is up and running, a cheaper way of selling its shares is to write to its existing shareholders asking them if they want to buy new shares.

A stock broking firm acts as professional’s eyes and ears. It is the investor’s link with the stock market and its role to obtain the stock market and its role to obtain the best price available for the investor’s shares, weather they are buying or selling. A stockbroker can also deal with all the paperwork involved in the transactions in stocks, such as gilt-edged securities and shares, which leaves the investor free to concentrate on his or her investment strategy.

Many people find their stockbroker by word or mouth alone (through friends, colleagues or acquaintances who recommend their own stockbroker). There are, however, a number of other ways in which to find a good stockbroker. It is possible to find a list of stockbrokers in the Yellow Pages. There is also a national directory of Private Client Investment Managers and Stockbrokers. It starts with an explanation of the main features of the membership, and then lists the types of service offered by them, followed by the range of products available.

The owners of Gap are the people who have bought shares that belong to Gap. Gaps shares are sold on the New York Stock Exchange (NYSE) for anyone that wants to buy them can do so as long as they are over 18 years old.

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