Methods of Raising Funds from Primary Market
Methods of raising capital from primary market are given in the image below.
Methods of raising capital through primary market are: ↓
- Public issue,
- Rights issue,
- Private placement.
Different methods of raising capital in primary market are: ↓
1. Public Issue
Here prospectus is issued, and a public appeal is made to subscribe the new shares / debentures issued by the company. Shares are allocated in response to application received. Some companies sell shares directly to the public while some take help of share brokers. The company appoints an advertising agency to advertise about the issue of shares.
2. Rights Issue
Rights issue means new shares are offered to the existing shareholders on the pro-rata basis. When company wants to raise additional capital, securities are first offered to the existing shareholders. If the shareholders do not want to buy shares, then the company can sell the shares to the outside public.
3. Private Placement
Private Placement of shares means the company sells its shares to a small group of investors. It can sell to banks, insurance companies, financial institutions, etc. It is an economical and quick method of selling securities. The company does not sell its shares to the public.