Marketing Timing Theory

Marketing Timing Theory

Marketing timing theory could be explained in terms of capital market opportunities, future prospect, over and under valuation of shares.

1.    Capital market opportunities

Financing is influenced by the available opportunities in capital market. This theory capital market provides an opportunity for financing. Therefore management must be in position to avail such opportunities.

2.    Management more informed 

Market timing theory says that management has more information than ordinary share holder; therefore management can take more informed decision than equity holder. This decision making power is to be used for financing decision.

3.    Future prospects analyses

Market timing theory requires details analyses of future prospects. Management supposed to analyze the situation. For example when future is bright but investor don’t think so (share are undervalued), management says future prospects is not good, investor thinks it is (share is overvalued)

4.    Financing in overvaluation Share

Marketing theory suggest that management should issue new finance, when share are overvalued, because at this time issue can be issued at premium. For example if the share price is $200, everyone is ready to pay the share at 150$ , where face value is $ 100. it means company can earn a premium of $ 50.

5.    Buy Back Share

Marketing theory explain that management must pay back (buy back share), when the share is being traded at lower value. for example a share issued at premium price i.e. 150 can be buy back, when share is being traded below that premium price ( for example at $ 140 or below).