METHODS OF OFFERING

Asha Susan Philip

Roll No: 07
4
th
Sem
Company raise finances in the primary market in
different ways:

PUBLIC OFFERING

RIGHT ISSUE

PRIVATE PLACEMENT
PUBLIC OFFERING
It involves sales of securities to the members of the
public.
3 types of public issue are:

Initial Public Offering

Seasoned Equity offering

Bond offering
RIGHTS ISSUE
A right issue involves selling of securities in the
primary market by issuing rights to the existing
shareholders.

When a company issues additional equity capital, it
has to be offered in the first instance to the existing
shareholders on a pro rata basis.
PRIVATE PLACEMENT
A Private placement is an issue of securities to a
selected group of persons not exceeding 49.
Private placement of shares and convertible
debentures by a listed company can be of 2 types:
Preferential allotment
Qualified Institutional placement.
Comparison of various methods.
PUBLIC ISSUE RIGHT ISSUE PRIVATE
PLACEMENT
Amount that can be
raised
Large Moderate Moderate
Cost of Issue high Negligible Negligible
Dilution of control yes No yes
Degree of under
pricing
Large irrelevant small

Market perception Negative Neutral Neutral