Chapter71. J&J Bhd. is a public listed company. Recently their R&D Department have invented a newsmart home remote control device. They need a huge amount of capital to market theirinvention to the public. They intend to raise RM100 million of capital from the public for theproduction and marketing of the new invention. Advise J&J Bhd. on the various methods ofraising share capital that would be available for their company.The first method of raising share capital is direct invitation to public. In this case, J&J Bhdwill issue its share directly to the member of the public who have applied in response to itsprospectus. Prospectus is a document that the company use to invite public to subscribe theirshare.Besides, the other method of raising share capital that can be used by J&J Bhd is Indirectinvitation. In this case, J&J Bhd may allot shares to an issuing house which they will offer forsale to the public. Issuing house as an underwriter, they guarantee if nobody subscribe to theshare, they will subscribe a certain percentage of the share. By using this method, J&J Bhdcan ensure that they have at least a minimum number of the share would subscribe to.Moreover, the other method of raising share is private placement. Placing is an arrangementwhere a financial institution matches its clients with the company to subscribe to largequantities of shares, often at a slight discount to the current market price of the share. In thiscase, J&J Bhd can offer some investment bankers to assist them to find a number of clientsfor offered large parcels of securities.Lastly, the method of raising share is right issue. An offer to the existing members inproportion to their shareholdings at the time of offer. It is usually priced at a slight discount tothe current market price. In this case, J&J Bhd may offer its shares to existing members whenincreasing its share capital. When the issue is non-renounceable, the rights will lapse ifexisting members do not exercise the rights. When the issue is renounceable, the membermay renounce his right and the company may offer the shares to the public.
