Daily News Analysis

Initial Public offer

14th July, 2021 Economy

Context:

  • Zomato IPO is coming to market for raising the funds.

Means of raising fund in the primary market

Initial Public Offer (IPO)

  • Initial Public Offer is the process of offering its new securities to the public/ investor for the first time through the issue of prospectus.
  • It is issued only by the unlisted company (a company whose shares are not traded on a stock exchange).

Follow on Public Offer (FPO)

  • Follow on Public Offer (FPO) refers to the process where already listed company offers its securities to the public/investor to an offer for sale.
  • A follow-on offering is the issuance of additional shares made by a company after an initial public offering (IPO).
  • It is also called as the secondary offering.

Right Issue

  • A listed company offers its new securities only to the existing shareholders in proportion to their existing shareholding.
  • In the Right Issue, shares are issued at a discount.

Referential Issue

  • Under this, a listed company offers its new securities only to a selected class of shareholders.

Bonus Issue

  • Bonus shares or issues are additional shares given to the existing shareholders without any additional cost, in the proportion of their shareholding in lieu of distribution of dividend.

Private Placement

  • Raising capital by selling the share to a select group of investors, or individual.
  • The advantage of the private placement is saving in marketing expenses.
  • Under this, number of investors who are issued shares cannot be more than 50.

Sweat Equity

Under this, the share is allotted to top management