The decision to issue ordinary shares is made in two stages:

 Stage I

The firm itself makes some initial decisions such as:

 (a) Amounts to be raised by the new shares

(b) The type of securities to be used—either preference shares or ordinary shares

(c) The method of issue—either competitive bids or negotiated deals

(d) Selection of investment banker

 Stage II decisions

These are made jointly by the firm and its selected investment banker and include:

 (a) Re-evaluating the initial decisions

(b) Deciding on the relationship between the banker and the firm. It may either be an under-writing relationship or best effort relationship

(c) The Bankers compensation and other expenses will have to be agreed upon

 The investment banker will thereafter undertake to sell the shares to the public on behalf of the firm.