Sometimes company sells its securities to a limited number of sophisticated investors.
Identify the method of floation of new issue discussed above.
Answer & explanation
Correct answer: option 2
The correct answer is option (2) - Private placement.
Private placement: Private placement means the direct sale by a company of its securities to a limited number of sophisticated investors. Entrepreneurs, herein, raise funds by selling the issues mainly to the institutional investors like:
i) Unit Trust of India
ii) Life Insurance Corporation of India
iii) General Insurance Corporation of India
iv) Army Group Insurance v) State Level Financial Corporations, etc.