QUESTION 7 a private placement of ord inary shares is an issue of shares to institutional investors, such as life insurance companies. The benefits of a private placement are total issue costs are smaller given that there is no need for a prospectus and the issue is not the issue is completed more quickly with the ad vantage that the proceeds are rece erve earlier the directors can issue shares to entities which support them, thus strengthening their own Shareholders may object to a private placement because a private placement reduces their holding in the company(dilution of power); a rights issue would give them the opportunity to make a profitSeptember 2003 QUESTION 7 A private placement of ordinary shares is an issue of shares to institutional investors, such as life insurance companies. The benefits of a private placement are: • total issue costs are smaller given that there is no need for a prospectus and the issue is not usually underwritten; • the issue is completed more quickly with the advantage that the proceeds are received earlier; • the directors can issue shares to entities which support them, thus strengthening their own positions. Shareholders may object to a private placement because: • a private placement reduces their holding in the company (dilution of power); • a rights issue would give them the opportunity to make a profit