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The shareholders are allowed to trade issued shares after completion of initial or secondary public offering. Then the investment banks do not intervention on the traded shares of the company. Rights Investment banks prefer to provide underwriting services to the private limited companies than public limited companies. This means they prefer initial public offering than secondary equity offering of public limited companies. Rights issue is also carried out by self offering by the companies. Public limited companies issue rights in the form of public offering as rights are issued to the general public.

Existing shareholders or the new potential investors can buy public offering from a public limited company. But a private limited company can issue rights in the form of issuing more shares to only the existing shareholders of the firm. From companies’ view point raising finance is through rights issue or equity issue is more preferable and also financial beneficial than debt issue. Risk retiring back to the raised capital is less in equity issue whereas the company is liable for paying the debt or credited amount to the creditors (NYU, 2012, p. 68).

Therefore, XX companies should raise finance in its need of finance through rights issue but not through lending from banks or other financial insinuations. Therefore, investment banks are more and more concentrating on this service rather than lending services. They always suggest their corporate client i. e. businesses for issuing equity and they are expertise in this underwriting service (Morrison & Wilhelm, 2007, p. 9). XX chemical also may directly offer rights to its existing shareholders for purchasing issued shares of the company. But, here risk of the company is higher as the total needed fund may not be raised as all shareholders may not accept the proposal or may not satisfy with the purpose of raising fund by the company.

But, investment bank will assure the company in terms of selling all the issued shares of the company otherwise they need to buy and hold the remaining shares until any individual or institution buy agrees to buy this. Therefore, the company will be secured to get the required fund for its proposed business activity (De, 2001, p. 28).

The company has the right to fix the transferability of shares at the time of issuing new shares. The shareholders are may allowed to transfer the purchased share to other privately or for public limited companies shareholders can trade it publicly or sometimes they can do any of the both.

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