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Types of public issue - Coggle Diagram
Types of public issue
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Intermediaries offer
An intermediaries offer is a marketing of new securities to intermediaries for them to allocate to their own clients, principally private client investors
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Open offers
Essentially this is the same as a rights issue, however the benefit of the right is not permitted to be traded
Placings
As in an offer for sale, securities are subscribed or purchased by the sponsoring firm of stockbrokers or issuing house but these are then placed with investment clients, a proportion also being sold through the market
Rights issue
This is where the company offers new shares to its existing shareholders in proportion to the number of shares they already hold
May be underwritten so that the company is assured of raising the full amount of the working capital it requires
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Underwriting
Companies will often use underwriting to ensure the success or at least the minimum amount required is raised
Where a share issue involves the need for potential investors to apply for shares, take up their rights in a rights issue etc, there is also a risk that investors do not subscribe for 100% of the shares on offer
Companies will mitigate this risk by entering into underwriting agreements with specialist financial institutions who guarantee to take up any unsold shares in return for a fee, typically between 3% and 7% of the issue price. Any shares they acquire will subsequently be sold in the market