Firm Commitment Equity Investment Agreement (FCEIA)
In corporate finance, a Firm Commitment Equity Investment Agreement (FCEIA) is a type of share allocation agreement between a company and a share purchaser. It is a form of private investment in public equity. An FCEIA offers a relatively flexible way of raising capital, allowing companies to further customize their approach to capital and risk management. It is a comparatively expedient and efficient avenue to raise the required quantum of funds as opposed to other forms of equity fundraising such as rights issue exercise, where the proceeds are raised on a lump sum basis, and such exercise generally has a longer implementation time. In a sense, FCEIA is similar to a line of credit extended by a lender, except that the financing is not done through debt but through equity.
In an FCEIA contract, a publicly traded company arranges to raise additional capital by selling new stock without making a public seasoned equity offering. A financial entity agrees to privately purchase a defined maximum of shares to be offered in specified lots (tranches) over a specified period. The purchaser gets the stock at a discount to the current market price and the FCEIA usually specifies a minimum stock price which the purchaser agrees to pay. If the company finds that it does not need more funds, then it can elect not to sell any shares at all. Also, the timing of sales is under the control of the company. The FCEIA allocation increases the number of the company's shares outstanding and its total shareholders' equity.
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