Difference Between Public Issue, Offer For Sale and Private Placement in IPO

In the context of share issuance on Bursa Malaysia, the terms "Public Issue," "Offer for Sale," and "Private Placement" refer to different methods of issuing shares to investors. Here are the differences between all three:

1. Public Issue:
   • Definition: This is when a company issues new shares to the public for the first time. Funds raised from the public issue go directly to the company and are typically used for expansion, debt repayment, or other corporate purposes.
   • Key Point: This increases the total number of shares available in the market.
2. Offer for Sale:
   • Definition: In this method, existing shareholders sell their shares to the public. The company does not receive any funds from the offer for sale; instead, the proceeds go to the shareholders who are selling their shares.
   • Key Point: This does not increase the total number of shares in the market as no new shares are created.
3. Private Placement:
   • Definition: This involves selling shares to a select group of investors, usually institutional investors, rather than to the general public. Private placements are often used to raise capital quickly and can be carried out with fewer regulatory requirements compared to a public issue.
   • Key Point: This may or may not increase the total number of shares in the market, depending on whether new shares are issued or existing shares are sold.

In summary, a Public Issue involves the company raising new capital by issuing new shares to the public, an Offer for Sale involves existing shareholders selling their shares to the public, and a Private Placement involves selling shares to a select group of investors with fewer regulatory requirements.

Frequently Asked Questions (FAQ)

What is the main difference between Public Issue and Offer for Sale?

A Public Issue involves a company issuing new shares to raise capital, whereas an Offer for Sale involves existing shareholders selling their shares to the public without the company receiving any funds.

Is Private Placement open to ordinary retail investors?

No. Private Placement is only offered to a select group of investors such as institutional investors and is not available to the general public.

How does an IPO benefit retail investors in Malaysia?

An IPO gives retail investors the opportunity to purchase shares at the initial offer price, which is typically lower. If the company grows, investors have the potential to earn capital gains.

What are the risks of investing in IPO shares?

Key risks include the share price potentially falling below the IPO price after listing, the company''s performance may not meet expectations, and share liquidity may be limited in the early stages.

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Understanding the differences between these share issuance methods is important before you begin investing in IPOs on Bursa Malaysia.

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Further Reading:

• Stock and IPO Risk Analysis Techniques for Smart Investors
• Revenue Group – New IPO
• Learn Stocks in 5 Easy Steps – The ABCDE Technique