Question

What is the term used to describe the issuance of securities, whether debt or equity, to a select group of investors such as banks, mutual funds, high net worth individuals, and financial institutions? 

A Primary issue Correct Answer Incorrect Answer
B Private Placement Correct Answer Incorrect Answer
C Secondary issue Correct Answer Incorrect Answer
D Book building Correct Answer Incorrect Answer
E Merchant Banking Correct Answer Incorrect Answer

Solution

Private placement is issuance of securities, debt or equity, to a limited number of subscribers, such as banks, FIs, MFs and high net worth individuals. Private Placement is arranged through a merchant/investment banker, who brings together the issuer and the investor(s).  In order to enhance transparency and increased disclosures, listed companies should disclose the utilization of proceeds raised through preferential issuance and qualified institutional placements in their annual reports. Currently, such disclosure is only required in case of public issuance.

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