Identify the various methods of issuing new ordinary shares to shareholders

CPA-Financial-Management-Section-3 Revision kit

The various methods of issuing ordinary shares to shareholders are:
– Bonus issue/stock dividend where they receive free shares each valued at par value instead of cash dividends
– Rights issue – shareholders buy additional shares at a price slightly lower than the current M.P.S in this case, the firm wants to raise new equity capital.
– Prospectus issue – where a firm issue/sell shares to members of the public for public subscription. Buyers of shares become shareholders or owners of the firm.
– Private placement – shares are not offered to public but to a small number of institutional investors such as insurance companies, mutual funds etc. This reduces floatation cost and speed up the raising of capital.
– Offer for sale tender – The seller/Firm fixes a minimum price and subscribers/potential shareholders are invited to tender for shares at prices equal to or higher than the minimum price. Shares are allotted on the basis of the highest price tendered.

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