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प्रश्न
Explain Pricing methods to offer shares to the public.
उत्तर
Public Issue or Public offer of Shares: Public Issue or offer means offering the shares to the public. This is the most common method used by companies. The company invites the public to subscribe to its shares by issuing a prospectus.
A company can use two pricing methods to offer shares to the public:
- Fixed Price Issue Method: Under this method, the company states in its prospectus, the quantity and the price at which the shares are offered to the public. The subscribers/investors are asked to pay a certain portion of the face value of shares or the entire issue price along with the application. The company comes to know the demand for its shares only after the subscription period ends. The company can issue shares at par or premium. The fixed Price method is used for all types of issues, i.e. Public Issues, Right Issues, ESOS, etc.
- Book-Building Method: Under this method, the issuer company determines the number of shares and the issue price at which its shares will be sold by the bidding process. The company issues a Red Herring Prospectus which contains the price range or price band and asks the investors to bid on it The lower end of the price band is called as 'floor price' while the highest end is called as 'cap price' or 'ceiling price'. The final price at which shares are offered ta the investors is called a 'cut-off' price. Investors can bid on any number of shares that they are willing to buy at any price within the price band. Bidding is kept open for 5 days. The bids along with the application money are to be submitted to the Lead Merchant Bankers called 'Book Runners' who enter the bids in a book. After bidding is over, the company fixes the 'cut-off price' based on the highest or best price at which all shares on offer can be sold. The company issues a Prospectus that contains the final price. BookBuilding Method is used for Public issues, i.e. IPO and FPO.
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संबंधित प्रश्न
___________ is offered to existing equity shareholders.
Select the correct answer from the options given below and rewrite the statement.
Bonus shares are issued free of cost to ______
Select the correct answer from the options given below and rewrite the statement.
Under ______, a company offers its securities to a select group of persons not exceeding 200.
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Subsequent issue of shares after an IPO.
Write a word or term or phrase which can substitute the following statement.
It is also called ‘Capitalisation of Profits’.
State whether the following statement is true or false.
Bonus Shares are issued at a discounted price to the Equity shareholders.
Find the odd one.
Complete the sentence.
In Book Building Method, the final price at which shares are offered to investors is called as ______
Answer in one sentence.
What is meant by private placement?
Answer in one sentence.
What is Public Issue?
Correct the underlined word and rewrite the following sentence:
FPO refers to offering of shares to the public for the first time.
Correct the underlined word and rewrite the following sentence.
Company enters into an underwriting agreement with the shareholders.
Explain the following term/concept.
Further Public Offer
Explain the following term/concept.
Rights Issue
Initial Public Offer and Further Public Offer
Match the pairs.
| Group A | Group B |
| a) Bond holders | 1) Deals with acquisition and use of assets |
| b) IPO | 2) Declared in Annual General Meeting |
| c) Corporate finance | 3) Any issue after first-time public offer |
| d) Final dividend | 4) Deals with acquisition and use of capital |
| e) Preference shares | 5) First-time public offer |
| 6) Fixed rate of dividend | |
| 7) Owners | |
| 8) Fluctuating rate of dividend | |
| 9) Creditors | |
| 10) Declared in board meeting |
Write a word or a term or a phrase which can substitute the following statements.
Highest bid price in Book Building method.
Explain provisions that the company must fulfil.
Give one word or phrase for the following sentence:
Full form of SARS.
