Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FM Exams › JUNE 2009 – JJG CO > Part c: What is placing?
- This topic has 3 replies, 2 voices, and was last updated 9 years ago by John Moffat.
- AuthorPosts
- June 17, 2014 at 4:32 pm #176883
I searched from internet that placing is issuance of shares partly or fully that are convertible debts and that the pre-emptive rights need to forgone.
Now But The bpp kit states that the placing is something that is raised for institutional investors by the market sponsors.
Can you explain me clearly what is placing?
Many Thanks
June 17, 2014 at 6:05 pm #176892A placing is where new shares are issued, but instead of being offered to everyone they are offered to specific investors.
BPP is more or less correct in that the specific investors will usually be specific institutions.
(The first definition that you quote in your question is not correct .
June 18, 2014 at 9:11 am #176953Why they are issued specifically?
June 18, 2014 at 3:36 pm #176997It is cheaper to arrange particular investors to buy them then have to go through the process of advertising them for sale to everyone.
Also (and more importantly) it makes it certain that the shares will all be sold. It has already been agreed with the people buying them. If they are advertised for sale generally then there is always a risk that the shares might not all be bought. (To guard against that, the company would usually have underwriters who guarantee to buy any shares that are not sold, but this costs the company money to employ them – it is like buying insurance.)
- AuthorPosts
- You must be logged in to reply to this topic.