In this article, I will discuss Shares and various types of public issues.
WHAT IS SHARE?
Each type of investment has its own set of qualities,
advantages, goals, and motivations. Investing in the stock market through
shares is the most popular and common of these many investment methods.
Actually, shares are a technique to gain partial
ownership (participation) in a corporation. When a person buys stock in a firm,
he or she becomes a partial shareholder in that company.
While there are benefits to owning a business in this
form of investment, there are also hazards linked with the company's
operations. Investing entails the purchase and sale of a company's stock.
The investor who purchases a company's shares is referred
to as the 'Share Holder' of that company.
In other terms, buying shares is also referred to as
"buying equity," and a shareholder is also referred to as an
"equity holder" or "equity shareholder." So, if you hear
the phrases 'Equity' and 'Scripts' instead of Shares don't be alarmed; they all
represent the same thing.
DIFFERENT TYPES
OF ISSUES
In the primary
market, investors are exposed to four different types of securities.
When an unlisted firm (unlisted company) makes an offer
in the capital market for the issue of new shares, or when a company offers its
securities (shares) to the general public for the first time, it is known as an
IPO (initial public offering).
This is referred to as an 'Initial Public Offer' (IPO).
IPO SEBI lists this firm on the stock market after the process is completed.
INITIAL PUBLIC OFFERING (IPO)
It is available in two formats: book building route and set
price route. The company sets a price band for its new shares in the book-building process. Investors apply in the pricing band that best suits their
needs.
The price gap between the top and bottom of this price band can be as much as 20%. After the book building process is done, the share price is determined.
The price gap between the top and bottom of this price band can be as much as 20%. After the book building process is done, the share price is determined.
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PUBLIC ISSUE
When an already listed company wants to bring a fresh issue
of shares in the primary market or wants to offer a part of its holdings to the
public, it is called a 'Public issue'. The working style of a public issue is
similar to that of an initial public offer.
RIGHT ISSUE
When a public listed company issues a new issue, it
usually does it as a rights issue, giving its shareholders first priority. The
company recommends to its shareholders that they buy new shares in proportion
to their existing shares under this rights issue.
Shareholders have the option to accept or reject the
Company's offer, as well as to empower any other shareholder to do so.
During a rights issue, there is a change in the market
prices of the company's shares. The price before the issue of the rights issue is
called the 'low right price' of the shares and the market price of the shares
after the allotment of shares under the rights issue is called the 'ex-rights
price'.
The difference between 'low right price' and 'ex right price' reflects the valuation of the rights issue by the stock market.
Reduced Rights - When the company announces bringing a rights issue, then the shares of that company become 'reduced rights' shares.
The company announces a fixed date. The shareholders prior to this date have the right to issue the rights. Naturally, 'less rights' share prices tend to be slightly higher.
X Right - After the issue of a rights issue by the company, the share of the right is removed from the price of the share, and the position of the share in the market at that time is called 'X Right'.
The difference between 'low right price' and 'ex right price' reflects the valuation of the rights issue by the stock market.
Reduced Rights - When the company announces bringing a rights issue, then the shares of that company become 'reduced rights' shares.
The company announces a fixed date. The shareholders prior to this date have the right to issue the rights. Naturally, 'less rights' share prices tend to be slightly higher.
X Right - After the issue of a rights issue by the company, the share of the right is removed from the price of the share, and the position of the share in the market at that time is called 'X Right'.
When a listed company issues an issue of equity to select
investors, in which the fixed price of the equity share is not related to the
immediate market price. This type of issue is called the 'Preferential issue'.
At
the time of public issue, the company presents certain information for the
convenience of the investor, such as what is the business of the company, who
are its promoters, who is the management, with which other companies this
company has collaboration, in the board of directors who is it, what is the
cost of its project, how is the financial arrangement being done, what is the
current status of the project, what is the profit position and what are the
prospects, what is the size of the issue, what is the status of listing in the stock
market, what are the provisions of tax exemption to the investor, who are the
underwriters and who are the managers of the issue, etc.
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