OREANDA-NEWS. February 04, 2015. Companies may need to raise funds for various reasons. For example, to enter into a new business, to grow an existing business, or to help facilitate a merger or acquisition. A few ways that companies can raise funds is via their own financial sources or take loans from banks, the government or other institutions that offer such services.

A company can also raise money by going public, or issuing securities via an initial public offering (IPO). There are two types of markets when it comes to raising capital by selling stocks: the primary market and secondary market. According to the SIAS guide book, a primary market is where securities are created via an initial public offering. The secondary market, on the other hand, allows investors to trade issued securities without the involvement of issuing companies.

The secondary market is a relevant forum for stocks that have already listed on an exchange. These stocks may still need to raise more money to fund their business objectives, like a business expansion, a debt payment, etc. Rights issues and private placements are two popular methods for stock fundraising. Rights issues are an issue of new shares to existing shareholders on a pro-rata basis so their holdings are not diluted. On the other hand, private placements involves issuing shares to potential investors selected by the company. They may not be existing shareholders, and are typically institutional investors such as banks and pension funds. To read more about SGX rules regarding rights issues and private placement, please click here.

The increase in funds raised from rights and placements had been relatively stable over the past five years – the total secondary funds raised hit a five-year high with a total sum of S\\$7.7 billion raised in 2014. Over the five-year period since the end of 2000, a total of S\\$30.4 billion was raised though placements and rights issues. This was made up of S\\$16.1 billion in rights issues and S\\$14.3 billion in placements. The chart below illustrates this activity.

Source: SGX

The five companies that raised the highest amount through rights issues from 2010 to 2014 were OCBC, Shangri-La Asia, K-REIT Asia, Gallant Venture and Yuexiu Property Company. They raised a combined sum of S\\$7.3 billion during the last five years.

Similarly, the five companies that raised the highest amount through placements from 2010 to 2014 were Teledata (Singapore), Ascendas Real Estate Investment Trust, Suntec Real Investment Trust, Noble Group, and Ascott Residence Trust. They raised a combined sum of S\\$4.5 billion during the last five years.