CSEET · Economic and Business Environment · Indian Financial Markets
Which one of the following is a feature that distinguishes an Offer for Sale (OFS) from a fresh issue of shares in an IPO?
In an offer for sale, existing shareholders such as promoters sell their already issued shares to the public, so the sale proceeds go to them and the company's share capital stays unchanged. In a fresh issue, new shares are created and the company receives the funds.
- AThe company's paid-up share capital increases and it receives the funds
- BExisting shareholders sell their already issued shares to the public, so proceeds go to the sellersCorrect
- CNo shares are allotted to any investor
- DIt can be made only by an unlisted company to its employees
Explanation
In an offer for sale, existing holders such as promoters offer their shares to investors, so the proceeds go to them and the company's share capital does not rise. A fresh issue creates new shares and the company receives the money, which is why the first option describes a fresh issue instead.
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