Public Offering Methods

Closed companies may prefer three different methods to offer their shares to investors during the public offering process. These methods can be categorised as shareholder sale (public offering of existing shares), capital increase (public offering through issuance of new shares) and mixed model where these two methods are used together. Each method has its own characteristics and benefits for companies.

1. Shareholder Sale (Public Offering of Existing Shares)

In this method, real or legal person shareholders who hold shares previously issued by the company offer their own shares to the public. This does not lead to an increase in the capital structure of the company; it is based on the sale of shares held by existing shareholders to investors.

Characteristics of the joint sale method:

There is no inflow of resources to the company capital. The income generated from the public offering belongs entirely to the shareholders who sell their shares.

Depending on the amount of shares offered to the public, the shareholding of existing shareholders in the company may decrease.

When the public offering is completed, the company becomes "publicly traded" and is subject to the obligations of this status.

This method is particularly preferred in cases where the company does not need to increase its capital, but the existing shares of the shareholders are utilised through a public offering.

2. Capital Increase (Public Offering through New Share Issue)

The capital increase method is realised by a closed company increasing its capital by issuing new shares. In this process, the rights of the existing shareholders of the company to acquire new shares (pre-emptive rights) are partially or completely restricted and new shares are offered to the public. However, in order for this method to be applied, the company's capital must be fully paid.

Characteristics of the capital increase method:

All proceeds from the public offering go directly into the company's coffers and strengthen the company's financial resources.

The company's capital structure expands and additional resources are created in line with growth targets.

With the participation of new shareholders, the company reaches a wider investor base.

This method is generally preferred by companies to finance growth plans, reduce debt or support new investments.

3. Combined Use of Shareholder Sale and Capital Increase

In this model, both the shares held by existing shareholders and the newly issued shares are offered to the public. Since the sale of existing shares and the capital increase are realised in the same process, this method offers a mixed structure.

Characteristics of the mixed method:

A portion of the IPO proceeds is transferred to existing shareholders who sell their shares, and a portion is transferred to the company through capital increase.

While the capital structure of the company expands, existing shareholders also have the opportunity to convert some of their shares into cash.

The newly issued shares and the existing shares sold are traded together within the scope of the public offering.

This method offers a flexible structure as it enables both the company to raise funds through capital increase and the existing shareholders to utilise their shares.