Promoter - Explained
What is a Promoter?
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What is a Promoter?
A promoter refers to a person or a company that finances a project or investment activity. Promoters support the cause of an activity, task or project and volunteer to help in raising money for the execution of the activity. In an investment activity, a promoter assumes the financial responsibility and help in raising money needed for the investment. A promoter can be an individual, company or organization. In exchange for raising funds for an investment activity, promoters receive a percentage of the funds raised or part of the stock of the company for which the fund was raised, this percentage or stock is given as compensation.
What Does a Promoter Do?
In relation to investment activities, a promoter has the responsibility of raising money for the investment. Aside from raising money, the promoter can also offer investment vehicles to the company. The aim of the promoters is to raise capital or funds for the project at hand, this requires coming up with information that convince investors or contributors to give financial support. In a bid to raise funds, investment promoters attract investors to the uniqueness of their investment, these investors can be domestic investors or foreign investors.
Types of Promoters
There are different types of promoters, the most popular types include the following;
- Casual Promoters: These are promoters birthed out of support for the brand or business, they patronize. For instance, the customers of a business that has good experience with the company can become casual promoters of the ompna, even without the knowledge of the company. They tell friends and family about the company, thereby, increasing the company's sales and revenue.
- Penny Stock Promoters: These types of promoters are used by companies that trade their stock for less than $5 per share. In the penny stock market, penny stock promoters support the cause of the companies and seek to help them increase their revenue. Also, penny stock promoters can bring about an increase in the price per share of these companies through the information they give to investors.
- Government-Based Trade Promoter: These promoters can be government agencies and bodies that help companies with international trade or help them trade in the foreign market. A good example is the International Trade Administration (ITA) in the United States.
Here are some vital points about a promoter;
- A promoter assumes the responsibility of raising money for an investment activity or increasing the revenue of a company.
- A promoter can either be an individual or an organization.
- There are different types of promoters, the common ones are casual promoters, penny stock promoters and government-based promoters.
- Companies also use promoters for correctional effect, especially if the image of the company has been shattered or there is a misconception about the company.
- Promoters present good information about a company to investors, clients or customers.
Criticism of Promoters
There are certain criticisms against promoters, the key ones include the following;
- A promoter can portray a company with not-so-good image as being good, causing investors or customers to make bad investment choices. Giving a false impression of a company is one of the strongest criticisms against promoters.
- Promoters are often overzealous to the extent that they portray a contrary as being successful over others, even when this is false.
- In the stock market, not every promotion activity is legal given that on many occasions, some promotion activities have been linked to investment scams and frauds.
- Promoters are often deceitful and provide skewed information to investors, thereby misinforming them.
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