Offer for Sale
Another method by which securities can be issued by means of an offer for this method. instead of the issuing company itself offering its shares directly to the herself through the intermediary of issue houses/merchant banks/investment banks or brokers. The modus operandi of the offer of sale is akin to the public issue method in that the prospectus with strictly prescribed minimum contents which constitutes the foundation for the sale of securities, 1 and 2 known quantity of shares are distributed to the applicants in a nondiscriminatory manner. Moreover, the issues are underwritten to avoid the possibility of the issue being left largely in the hands of the issuing houses. But the mechanism adopted is different. The sale of securities with an offer for sale method is done in two stages.
The offer for sale method shares the advantage variable to public issue method. One additional advantage of this method is that the issuing com, is saved from the cost and trouble of selling the shares to the public. Apart from being expensive like the public issue method, it suffers from another serious shortcoming. The securities are sold to the investing public usually at a premium. The margin between the amount received by the company and the price paid by the public does not become additional funds, but it is pocketed by the issuing houses or the existing shareholders.