Overview

Question 1

Commercial reasons for secondary share issues

Answer 1

• Business expansion – raise further finance to fund new acquisitions or expand staff
• Acquisition of another company or business – obtain funds to acquire public or private companies in same or different market (or offer own shares as consideration)
• Debt reduction – meet interest obligations under existing arrangements; too highly geared

Question 2

Main Methods of Secondary Share Issues

Answer 2

Secondary Share issues split into:
i) Non-pre-emptive – placings
ii) Pre-emptive – rights issues and open offers
Can be done either by way of Gazette Route or Disapplication Route

Question 3

What are the three types of share issues we focus on?

Answer 3

i) Rights issue – is to existing shareholders, so it is pre-emptive by nature
ii) Open offer - is to existing shareholders, so it is pre-emptive by nature
iii) Placing – generally not a pre-emptive SH i.e. don’t offer to existing SH, so SH tend to like placings less bc not pre-emptive/not offered to them, but if company needs to raise money quickly they may be fine with it.