I’m doing a case study for my environment class at uni on Rio Tinto’s operations in Mozambique. I’m reading an article with a timeline and in mentions that RT raised $USD 2.5 billion and $3 billion on different occasions through debt securities registered with the SEC.
I’m not fiscally minded at all so I’m struggling to grasp it. Did the SEC lend them $2.5 billion or buy their debt or something?
The SEC ended up raising legal action against them.
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Broadly there’s two types of companies:
– Privately traded companies are traded off market in agreements directly between owners/new owners of the company. E.g. to invest I could buy 5% from the owner, or maybe an existing investor.
To invest in these, you need to meet certain criteria – basically, have enough money. This is to protect people from scams.
– Publicly traded companies are the ones you see on stock markets, etc. Anyone can buy stocks, and there’s typically a fairly liquid market (you can go and buy/sell the stock anytime during the exchange’s open hours without difficulty).
To be a publicly traded company, in the US, you have to register with the SEC. This involves providing a bunch of documentation about your company to the public, releasing regular reports, etc – essentially you have to be much more transparent about the operation of your company so that the markets know what is going on.
When a company “raises” money by going public, it’s doing the latter with the SEC, then selling its stock on exchanges to the general public.
Presumably, In this case RT broke some of the SEC’s rules (e.g. failed to do proper reporting) and is being sued for it.
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