CS Executive · Capital Market and Securities Laws · Basics of Capital Market
Sunrise Textiles Ltd, an unlisted company, offers its shares to the general public for the first time through a prospectus to raise funds for a new plant. Which term best describes this issue?
The issue is an Initial Public Offer, because an unlisted company is inviting the general public to subscribe to its shares for the first time through a prospectus. Rights, private placement and bonus issues are not public first-time offers.
- AInitial public offerCorrect
- BRights issue
- CPrivate placement
- DBonus issue
Explanation
When an unlisted company offers shares to the public for the first time through a prospectus, it is an Initial Public Offer (IPO). A rights issue is made only to existing shareholders, private placement is to select persons, and a bonus issue involves no fresh funds from investors.
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