MARKETING
OF
SECURITIES
 Marketing of securities is a procedure to
approach a large number of investors
(individual and institutional) to invest their
funds or savings in the shares or debentures of
a company.
 It is the process of purchase and sale of
securities and it includes functions of all such
agencies and intermediaries which help in
their purchase, sale, transfer, underwrite etc.
such as brokers, underwriters etc.
MARKETABLE SECURITIES
(MEANING)
 Marketable
securities are unrestricted
financial instruments which can be readily
sold on a stock exchange or bond exchange.
 Marketable securities are very liquid as they
tend to have maturities of less than one year.
 Examples of marketable securities include
commercial paper, banker's acceptances,
Treasury bills and other money market
instruments.
Types Of Marketable
Securities
1. Marketable Equity Securities - any instrument
that demonstrates ownership of shares in a
company such as common stock and preferred
stock.
 Common stock represents the basic equity
ownership in a corporation.
 Preferred stock is a specific type of stock.It is
more stable investment vehicle because it
guarantees a regular dividend.
2. Marketable Debt Securities - Debt securities are
any debt instrument that can be bought or sold
between two parties.
 Debt securities are generally issued for a fixed
term and redeemable by the issuer at the end of
that term. Debt securities may be protected by
collateral or may be unsecured.
 Examples: 1). Treasury bills; 2). Treasury notes;
3). Treasury bonds; 4). Municipal bonds.
METHODS OF MARKETING OF
SECURITIES
Right
issue
Bonus issue
Offer for sale
Placement method
Subscription by the inside
coteries
Public issue by prospectus
Public Issue by Prospectus
•This is the most popular method of raising funds.
•The company issues a prospectus inviting
applications direct from the public or through some
intermediaries such as brokers, investment house
and underwriters etc. for tasking up the new shares
or debentures.
•Legally, a public limited company cannot raise
share capital from the public without issuing
prospectus.
•Sometimes, company imposes a restriction of
the minimum number of shares to be subscribed
for, in order to save the cost of issue.
•This is the least expensive way of disposing of
securities and has an approach to a wider section
of public.
•But at the same time, it bears the risk of being
unsuccessful.
•There is another danger in case of a new
company that it may not get even the minimum
subscription.
Offer for Sale
•This is another method usually adopted in the case of large
issue.
• Under this method, the company does not issue prospectus
but it sales or agrees to sell the securities to the issue houses
or to the financial institutions, at fixed price.
• Such issue houses or financial institutions in turn issue a
statement like prospectus called 'offer for sale' as an
advertisement the newspapers for inviting applications from
the public at a price generally higher than the purchase price.
The difference of purchases price and issue price is their
remuneration for managing the issue.
•This method besides having all advantages of the
issue of Prospectus methods ha one more
advantage. It relieves the company from the
administrative work and the cost of the new issue
and at the same time, it ensures that the whole
issue is sold even at a time when conditions in
capital market are unfavorable. But this method
has certain disadvantages too.
• Under this method, the issue houses generally
issue the shares at a price higher than the
purchase price and the difference goes to be issue
houses and not to the company.
Placement Method
• Under this method, the securities are sold to the
issue house or broker or financial institutions
privately and not by issuing prospectus in order to
place them with their clients and associates.
Alternatively, they act as an agent for selling the
securities to their clients privately. It is called
private placing.
•The method is quite cheap because cost of issue
is negligible but the shares under this method are
available only to a selected group of investors
Right Issue
•Such issue are generally offered by the
company for cash to the existing equity
shareholders only. There is a statutory provision
under Companies Act to offer new issue by an
existing company first to the existing
shareholders in the ratio of their holdings, and if
existing shareholders refuse to subscribe for
their obligations, only then such shares can be
issued to the public. It is also known as
'Privileged Subscription'.
Bonus Issue
•When a company has lack of funds to pay off
dividends, but possesses sufficient reserves and
accumulated balance of profits, it generally
capitalizes such profits and reserves by issuing
new shares to the existing shareholders in
addition to the cash dividend.
•There are certain restrictions, imposed by the
Companies Act and the guidelines for the issue
of bonus shares issue by the Finance Ministry
which are to be followed by a company for such
issue.
Subscription by Inside Coteries
•Under this method, a certain percentage of new
issue is kept in reserve for subscription by inside
coteries such as workers, directors etc.
Advantages Of Marketing OF
Securities
1. Merchants gain a wider place to sell their
products and services, resulting in more
customers and more sales.
2. Merchants can gain more customers without
spending valuable time in searching for
them.
3. The affiliate marketing programme provides
an easy way to create additional sources of
income for website publishers and owners.
4. The affiliate does not have to worry
about customer support, book keeping,
and e-commerce related headaches since
in affiliate marketing, the merchant
handles it all.
5. An affiliate marketer enjoys the luxury
of being his own boss and work on his own
time.
PROBLEMS
OF
MARKETING
OF
SECURITIES
PRIMARY
DISTRIBUTION
TRADING IN
OLD
SECURITIES
DISADVANTAGES
1. There is the possibility that some merchants may
incur high commission costs and costly set up and
maintenance
fees
due
to
affiliate
facilitators/brokers.
2. The affiliates may engage in false and misleading
advertising in order to get sales commissions.
3. Unscrupulous and dishonest merchants may
arbitrarily close down programs without informing
the affiliates and without paying commissions.
4. Merchants may promise high commissions
to attract new affiliates then drop
commission rates after a week or two.
5. Link hijackers can hijack affiliate links and
get paid for the commissions instead.
6. There are also false advertising, unlawful use
of trade names, logos, or brands.
THANK YOU