A public offer is the selling of securities by a company to the public in the primary market. It is essential for a public company to issue a prospectus if it intends to appeal to the public for capital to carry out the objects for which it has been constituted.
Prospectus is a document which gives all the details about the company and the proposed issue of shares to enable informed decision by the intending investor of shares in the company.
It is, in fact a ‘market show’ so as to attract investors for putting money into the securities of the company. A public offer can be made through: fixed price method or book building method.
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In offer for sale method, a company allots shares to issue houses or other intermediaries or the promoters with a view to such shares being offered for sale to the public by such issue houses or the promoters. In certain situations, this offer for sale is deemed as a public offer by the company.
Right issue is the offer for subscription of shares made by a public company to its existing equity shareholders as a matter of their right. In fact, it is obligatory for a public company to make such an offer in case of further issue of shares.
Private placement is issuing of shares privately to the friends, relatives or acquiesces of the promoters.
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A public company which does make public offer of shares, need not issue a prospectus; in such a case, it will have to file a Statement in Lieu of Prospectus with the Registrar of Companies.
A private company, by its very constitution, is prohibited from inviting the monetary participation of the public, and, therefore, it need not issue a prospectus or file a statement in lieu of prospectus.