Methods of Marketing Securities

1. Pure Prospectus Method

2. Offer for Sale Method
3. Private Placement Method
4. Initial public Offers (IPOs) Method
5. Rights Issue Method
6. Bonus Issue Method
7. Book-building Method
8. Stock Option Method and
9. Bought-out Deals Method

1. Pure prospectus Method
Features
Exclusive subscription
Issue Price
Underwriting
Prospectus
Advantages
Benefits to investors
benefits to issuers
Drawbacks
High issue costs
Time consuming
2. Offer for sale method
Where the marketing of securities takes place through
intermediaries, such as issue houses, stock brokers and
others

The difference between the purchase price and the
issue price constitutes profit for the intermediaries
3. Private placement method
A method of marketing of securities whereby the
issuer makes the offer of sale to individual and
institutions privately without the issue of prospectus is
known as Private placement method
Initial Public Offer (IPO) Method

The public issue made by a corporate entity for the
first time in its life is called Initial public Offer (IPO)
The job of selling the stock is entrusted to a popular
intermediary, the underwriter.

steps involved in this method of
marketing of securities are as
follows:

Order: Broker receives order from the client and places orders
on behalf of the client with the issuer.
Share Allocation: The issuer finalizes share allocation and
informs the broker regarding the same.
The Client: The broker advises the successful clients of the
share allocation. Clients then submit the application forms for
shares and make payment to the issuer through the broker.
Primary issue account: The issuer opens a separate escrow
account (primary issue account) for the primary market issue.
The clearing house of the exchange debits the primary issue
account of the broker and credits the issuers account.
Certificates: Certificates are then delivered to investors.
Otherwise depository account may be credited.
Rights issue Method
Where the shares of an existing company are offered to
its existing shareholders.
Underwriting as to rights issue is optional and
appointment of Registrar is compulsory.

Rights issue offers the following
advantages

Economy: Rights issue constitutes the most economical
method of raising fresh capital, as it involves no
underwriting and brokerage costs.
Easy: The issue management procedures connected with
the rights issue are easier as only a limited number of
applications are to be handled.
Advantage to shareholders: Issue of rights shares does
not involve any dilution of ownership of existing
shareholders.

Bonus Issues Method

Where the accumulated reserves and surplus of profits
of a company are converted into paid up capital, it
takes the form of issue of bonus shares. It merely
implied capitalization of existing reserves and surplus
of a company.

Book-building Method

A method of marketing the shares of a company
whereby the quantum and the price of the securities to
be issued will be decided on the basis of the bids
received from the prospective shareholders by the lead
merchant bankers is known as book-building method
The book-building process involves
the following steps
Appointment of book-runners
A syndicate member should be a member of National Stock
Exchange (NSE) or Over-the-Counter Exchange of India
(OTCEI). Offers of bids are to be made by investors to the
syndicate members, who register the demands of investors.
Drafting prospectus
Circulating draft prospectus
Maintain offer records
contd
Intimation about aggregate orders
Bid analysis
An appropriate final price is arrived at after a careful evaluation
of demands at various prices and the quantity
Mandatory underwriting
Filling with ROC (Registrar of Companies )
Bank accounts
one for the private placement portion and the other for the
public subscription.
Collection of completed applications
Allotment of securities
Payment schedule and listing
Under-subscription-(preference is given to the individual
investors.)

Stock Option or employees Stock
Option Scheme (ESOP)
A method of marketing the securities of a company
whereby its employees are encouraged to take up
shares and subscribe to it is known as stock option
SEBI Guidelines

Issue at discount
Approval
Maximum limit
Minimum period
Superindence
direction of a Compensation Committee of the Board of
Directors in which there would be a majority of
independent directors.
Eligibility
Directors report
Bought-out Deals

A method for marketing of securities of a body
corporate whereby the promoters of an unlisted
company make an outright sale of a chunk of equity
shares to a single sponsor or the lead sponsor is known
as bought-out deals.