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There were many Private Placement that had preceded many recent Initial Public Offerings (IPOS). Is it fair for companies to carryout a Private Placements prior to an IPO at a discounted Price? Instead why not subdivide the existing capital get the shares free!!
If a company carries out a 10:1 Subdivision (Split) prior to an IPO it is equal to existing shareholders getting 1000% discount to the share price. It is far better or worse than having a Private Placement at a 100% discount to the Issue Price.
Just have a look at the ODEL IPO and Changes to the shareholding structure just prior to the IPO. Amazing Subdivision of 900:1
Page 27 of the Prospects http://www.cse.lk/270808/pdf/odel_ipo_prospectus.pdf
The new Companies Act of 2007 allows many new methods for capital restructuring:
-Issue of share for consideration other than money
-Subdivision and Consolidation of Shares
-Share Repurchase
-Revaluation of assets and subsequent capitalization
-Share Warrants
So there are so many ways to skin a cat. Private Placement is the most innocent and transparent method of these options.
Purpose of the Article is to educate the Investors to make a rational and a prudent investment decision.
"Experience taught me a few things. One is to listen to your gut, no matter how good something sounds on paper. The second is that you're generally better off sticking with what you know. And the third is that sometimes your best investments are the ones you don't make."
Donald Trump
If a company carries out a 10:1 Subdivision (Split) prior to an IPO it is equal to existing shareholders getting 1000% discount to the share price. It is far better or worse than having a Private Placement at a 100% discount to the Issue Price.
Just have a look at the ODEL IPO and Changes to the shareholding structure just prior to the IPO. Amazing Subdivision of 900:1
Page 27 of the Prospects http://www.cse.lk/270808/pdf/odel_ipo_prospectus.pdf
The new Companies Act of 2007 allows many new methods for capital restructuring:
-Issue of share for consideration other than money
-Subdivision and Consolidation of Shares
-Share Repurchase
-Revaluation of assets and subsequent capitalization
-Share Warrants
So there are so many ways to skin a cat. Private Placement is the most innocent and transparent method of these options.
Purpose of the Article is to educate the Investors to make a rational and a prudent investment decision.
"Experience taught me a few things. One is to listen to your gut, no matter how good something sounds on paper. The second is that you're generally better off sticking with what you know. And the third is that sometimes your best investments are the ones you don't make."
Donald Trump
