Under the method of offer through prospectus, the issues may be ________ and are also required to be listed on at least one stock exchange.
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → underwritten
Option (1) sold en bloc to brokers — Incorrect. Selling securities en bloc at an agreed price to brokers, who resell them, is the method of offer for sale.
Option (2) underwritten — Correct. In an offer through prospectus, the public is invited to subscribe. The issues may be underwritten, and they must be listed on at least one stock exchange.
Option (3) offered to existing shareholders — Incorrect. Offering new shares to existing shareholders is a rights issue.
Option (4) placed privately — Incorrect. Allotting securities to institutional investors and some selected individuals is private placement. A prospectus invites the general public.
NCERT (Pre-rationalised Edition): “1. Offer through Prospectus: Offer through prospectus is the most popular method of raising funds by public companies in the primary market. This involves inviting subscription from the public through issue of prospectus. A prospectus makes a direct appeal to investors to raise capital, through an advertisement in newspapers and magazines. The issues may be underwritten and also are required to be listed on at least one stock exchange. The contents of the prospectus have to be in accordance with the provisions of the Companies Act and SEBI disclosure and investor protection guidelines.” |