NISM Certifications · NISM-Series-VII: Securities Operations and Risk Management · Introduction to the Securities Market
A company wants to list its equity for the first time and shifts from being privately held to being publicly traded by offering existing shareholders' shares for sale to the public, without raising any fresh capital. Which description fits this offering best?
This is an offer for sale as part of an IPO, where existing shareholders sell their holdings to the public and the company raises no fresh capital. Rights issues, bonus issues and QIPs all involve issuing new shares, so they do not match the description.
- ARights issue
- BOffer for sale in an initial public offerCorrect
- CBonus issue
- DQualified institutions placement of fresh shares
Explanation
In an offer for sale, existing shareholders sell their shares to the public, so the company receives no fresh funds; proceeds go to the selling shareholders. A rights issue and QIP issue new shares, and a bonus issue capitalises reserves with no money raised from investors.
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