The directors of a company want to modernise its plant and machinery by making a public issue of shares. They wish to approach stock exchange, while the finance manager prefers to approach a consultant for a new public issue of shares. Advise the directors whether to approach stock exchange or a consultant for new public issue of shares and why? Also advise about the different methods which the company may adopt for the new public issue of shares.
I advise the directors to approach a 'consultant' as new issue of shares is not possible in stock exchange. Stock exchange is a secondary market, where, only existing securities are traded.
For new public issue, primary market or the new issue market is an appropriate place. Different methods of flaotation of new issues of shares are:
(i) Offer through prospectus
(ii) Offer for sale
(iii) Right issue
(v) Private placement