5 Methods of Share Issues

Following are the five common methods of share issues:

1) Public Issue - This involves a corporation making an invitation to the general public to subscribe or purchase its shares. For instance, a listed company made a public issue of 1,000,000 New Ordinary Shares of $1 each at an issue price of $1.20 per ordinary share payable in full on application.

2) Offers for sale - This method involves a corporation selling a new issue of share to an issuing house, and the issuing house will bear the risks of selling shares to other investors.

3) Private placings - This method involves an issue of new shares to financial institutions and large private clients rather than making an invitation to the general public to subscribe to shares.

4) Bonus issues - A listed company may capitalize part of its reserves by making a bonus issue to the existing shareholders, and no cash will be paid to such issues. For instance, if a corporation declares a 1 for 5 bonus issue, that means for every 5 shares held, an existing shareholder will receive 1 share for free.

5) Rights issue - A corporation may make a rights issue to its ordinary shareholders. Existing shareholders will be given the rights to buy a new share at a price lower than that listed in the stock exchange.

* Next: Main Types of Stocks
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