Question

Which of the following methods of floatation of new issues is used by the company when the company directly sells its securities to a limited number of sophisticated investors and at times does not want to disclose information to the open market?

• A. Public Issue
• B. Rights Issue
• C. Private Placement
• D. Offer to the Employees

Hint:

Private Placement = Direct sale to select investors without public disclosure. Think: Private = Limited and selective.

Answer 1

The Correct Option is C

Private Placement is a method of issuing shares or securities directly to a select group of investors, typically institutional or sophisticated investors. It helps the company raise capital quickly without the need for public disclosure or regulatory compliance that applies to public issues. Other methods:
Public Issue: Selling securities to the general public through stock exchanges.
Rights Issue: Issuing new shares to existing shareholders in proportion to their holdings.
Offer to Employees: Shares are offered specifically to company employees. Hence, the correct answer is (C) Private Placement.