Question

What are the methods of flotation in Primary Market?

Answer 1

Methods of Floatation in Primary Market are:

• Offer through Prospectus: Offer through prospectus is the most popular method of raising funds by public companies in the primary market. This involves inviting subscription from the public through issue of the prospectus. A prospectus makes a direct appeal to investors to raise capital, through an advertisement in newspapers and magazines.
  
• Offer for Sale: Under this method, securities are not issued directly to the public but are offered for sale through intermediaries like issuing houses or stock brokers.
  
• Private Placement: Private placement is the allotment of securities by a company to institutional investors and some selected individuals. It helps to raise capital more quickly than a public issue.
  
• Rights Issue: This is a privilege given to existing shareholders to subscribe to a new issue of shares according to the terms and conditions of the company.