Methods: Offer For Sales, Offer For Subscription, Right Issues, Private Placement - SS2 Accounting Lesson Note
The capital market is a financial market where long-term securities such as stocks, bonds, and other investments are traded. Here are some of the methods of raising funds from the capital market:
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Offer for sale (OFS): An offer for sale is a method of raising funds from the capital market where existing shareholders of a company sell their shares to the public. This is done through a stock exchange, where the shares are listed for sale. The company does not receive any funds directly from the sale of these shares.
Offer for subscription (OFS): An offer for subscription is a method of raising funds from the capital market where new shares are issued to the public for the first time. This is done through a prospectus, which contains details about the company and the securities being offered. Investors can then subscribe to these shares by paying the subscription price.
Rights issue: A rights issue is a method of raising funds from the capital market where existing shareholders of a company are given the right to subscribe to new shares. These new shares are issued at a discounted price to the market price. This allows existing shareholders to maintain their proportional ownership in the company.
Private placement: Private placement is a method of raising funds from the capital market where securities are sold to a select group of investors, such as institutional investors or wealthy individuals. This method is typically used by companies that do not want to go through the public offering process or that want to maintain control over who invests in the company.