Share allotment is a crucial process for companies looking to raise capital or expand their business. In Singapore, the allotment of shares is governed by the Companies Act and the regulations set by the Monetary Authority of Singapore (MAS). Share allotment is a way for companies to raise funds by issuing new shares to investors or existing shareholders. In this article, we will discuss the different types of share allotment done in Singapore companies.
Initial Public Offerings (IPOs)
An initial public offering (IPO) is a process in which a company goes public by offering its shares to the public for the first time. IPOs are a common way for companies to raise funds and increase their public profile. In Singapore, companies looking to go public must comply with the regulations set by the MAS and the Singapore Exchange (SGX).
The process of an IPO typically involves hiring an investment bank to act as an underwriter and assist in the pricing and sale of the shares. The underwriter also helps to prepare the company for its listing on the stock exchange, including drafting the prospectus and fulfilling disclosure requirements.
Once the shares are listed on the stock exchange, investors can buy and sell them on the open market. This provides liquidity for the company’s shares and allows investors to easily invest in the company.
A rights issue is a way for a company to raise funds by issuing new shares to its existing shareholders. In a rights issue, existing shareholders are given the opportunity to buy new shares at a discounted price. This is done in proportion to their existing shareholding, so the larger the shareholder’s existing stake, the more new shares they can purchase.
Rights issues are often used by companies to raise funds quickly and efficiently. They are also a way to ensure that existing shareholders are not diluted by the issuance of new shares to outside investors.
A bonus issue is a way for a company to reward its existing shareholders by issuing new shares to them for free. Bonus issues are usually done when a company has excess cash or profits that it wants to distribute to its shareholders. The new shares are issued in proportion to the existing shareholding, so the shareholder’s ownership stake remains the same.
Bonus issues do not raise any new funds for the company, but they can help to increase liquidity in the company’s shares and improve the company’s stock price.
Employee Share Option Schemes (ESOS)
Employee share option schemes (ESOS) are a way for companies to reward their employees by offering them the opportunity to purchase shares in the company at a discounted price. ESOS are often used to incentivize and retain key employees, and to align their interests with those of the company.
ESOS are usually offered to a select group of employees, and the number of shares they can purchase is usually limited. ESOS are typically structured as options, which means that employees are not required to purchase the shares immediately, but can exercise their option to purchase the shares at a later date.
Allotment of shares is an important process for companies looking to raise capital or expand their business. There are several types of share allotment available to Singapore companies, including initial public offerings, rights issues, bonus issues, private placements, and employee share option schemes (ESOS). Each type of share allotment has its own advantages and disadvantages, and companies must carefully consider which type is most suitable for their needs.