2. The offer and application process a.

Methods of offer: offer for subscription, offer for sale and placing

There are two main types: retail and institutional offerings

Cost

Timing

Retail More expensive as must appoint

Institutional Shares offerd through IB

receiving bank to deal with share

and broker directly to

applications. Also more advertising

investors

required which adds to cost More marketing required and share

Fewer investors usually

application requests to be

identified prior to Launch

processed, so generally takes Shareholder

longer Results in larger shareholder base

Liquidity

Lower liquidity as shares held in hands of fewer SH

Retail Offers

*

Includes two elements: offer for subscription (in which new shares are sold to public) and offer for sale (in which existing shares sold). Often both are used in same floatation.

Offer for subscription: "...subscribe for securities not yet in issue.." A. Company issues new shares as way of raising capital for company B. Shares offered to public in IPO: Investors subscribe for shares; and C. Company appoints receiving bank to accept applications from public and eal with payment for shares Offer for Sale: "...purchase securities of issuer already in issue or allotted..."

* Offer of existing shares. Sold to public in IPO by selling shareholders. Does not raise any new capital for company. Selling shareholder appoints bank to accept applications and receive payment

Institutional Offers

Placing: "...marketing of securities already in issue but not listed..."

* Both new and existing shares can be offered by company and selling shareholders.

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