Equity: The Basics for SPVs and Funds
Learn the definition of Equity and how does it work.
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Equity is a key term in business and investment, especially for Special Purpose Vehicles (SPVs) and funds. Whether new to the investment landscape or looking to manage an SPV, this overview will provide you with the essentials.
What is Equity?
Equity represents ownership in a company or project. It is the value that remains in a business after all its debts and liabilities are paid. Equity is often issued as shares or stock, giving investors a stake in the company’s success. When you own equity, you own a piece of the business.
Equity is a vital tool for raising capital for SPVs and funds. Investors contribute money in exchange for shares in a company or project, and their returns depend on the success of the business or investment venture.
How does Equity work?
Companies issue equity to attract investors and raise funds. For example, a business may issue shares to investors through an SPV. The SPV pools funds from multiple investors, who then receive equity stakes in the company. This gives them a share of the profits if the company performs well or a portion of the assets if sold.
Equity comes in different types, such as:
- Common Equity: Shares that give investors ownership and, often, voting rights.
- Preferred Equity: Shares that may not come with voting rights but have priority in receiving dividends before common shareholders.
SPVs and funds structure equity deals based on what best suits their investment goals and investors’ needs.
Uses of Equity
Equity serves several important purposes, especially within SPVs and funds:
- Raising Capital: Equity allows companies to secure funding without taking on debt. SPVs use equity to pool money from multiple investors for a specific investment.
- Ownership and Control: Equity gives investors a share of the business, sometimes allowing them to influence key decisions.
- Returns on Investment: Investors can earn returns through dividends or by selling their shares if the business’s value increases.
Frequently Asked Questions:
What is the difference between equity and debt?
Equity represents ownership in a company, while debt is borrowed money that must be repaid with interest.
How do equity returns work for investors?
Returns can come from dividends paid by the company or from selling shares at a higher price.
Simplify Equity Management with Auptimate
Whether you’re an investor or founder, managing equity through an SPV doesn’t have to be complex. At Auptimate, we streamline every step—automating SPV formation, compliance, and reporting—so you can focus on securing deals and building value. Our SPV solutions optimise your investment process, helping you grow your portfolio efficiently.
