Question

Identify the method of flotation in the Primary Market wherein a company sells securities en bloc. at an agreed price to a broker.

• A. Rights issue
• B. Offer for sale
• C. e-IPOs
• D. Offer through Prospectus

Answer 1

The Correct Option is B

To identify the method of floatation in the Primary Market where a company sells securities en bloc (in bulk) at an agreed price to a broker, let's analyze each option in detail:

Options Analysis

Rights Issue (1)

Definition: A rights issue is a type of securities offering where companies provide their existing shareholders the right to purchase additional shares directly from the company at a specified price. This is typically done to raise capital from existing investors.

Why Not: In a rights issue, the company sells securities directly to existing shareholders, not to brokers in bulk.

Offer for Sale (2)

Definition: An offer for sale is a method where the company sells its securities to a broker or a group of brokers at a predetermined price. The brokers then sell these securities to the public. This method is often used when the company wants to sell a large number of securities quickly.

Why Correct: This method matches the description of selling securities en bloc at an agreed price to a broker.

e-IPOs (3)

Definition: An electronic Initial Public Offering (e-IPO) is a method where securities are offered to the public through online platforms. This method allows investors to apply for shares directly through electronic means.

Why Not: e-IPOs involve direct public offerings and do not involve selling securities in bulk to brokers.

Offer through Prospectus (4)

Definition: An offer through prospectus is a method where the company issues a detailed document (prospectus) that provides information about the securities being offered, the company's financials, and other relevant details. This method is used for both public and private offerings.

Why Not: While this method involves offering securities to the public, it does not specifically involve selling securities in bulk to brokers.

The correct answer is: (2) Offer for sale

This method involves the company selling its securities en bloc at an agreed price to a broker, who then sells these securities to the public. This matches the description provided in the question.