NISM Certifications · NISM-Series-XV: Research Analyst · Introduction to Securities Market
A company already listed on a stock exchange offers fresh shares only to its existing shareholders in proportion to their holdings. This route of raising capital is called:
This is a rights issue. A listed company offers new shares to existing shareholders in proportion to their holdings and receives fresh capital. It differs from an IPO, an offer for sale, where the company raises nothing, and a bonus issue, which is free.
- AInitial public offer
- BRights issueCorrect
- COffer for sale
- DBonus issue
Explanation
A rights issue gives existing shareholders the right to subscribe to new shares in proportion to their holdings, and the company receives fresh money. An IPO is a first-time public offer. An offer for sale involves existing holders selling shares, so the company gets no money. A bonus issue is free and raises no capital.
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