Question

Why the shelf registration is more common in bond market than in equity market?

Answer 1

A bond is a fixed interest bearing securitywhich represents a loan made by an investor to a borrower. governments and corporations mainly use bonds in case of procurement of money. the initial price of bond will be set at par and the actual market price may vary according to so many factors such as market conditions etc . Reward for bonds can be termed as interest which is termed as coupon rate . Bonds are classified into so many types based on its charecteristics

Equity represents the shareholders funds ie, the amount of money which should be returned to a companys shareholders if all of the companys assets were liquidated and all of the companys debt was paid off

shareholders equity = total asset-total liabilities

Shelf registration is simply the process of offering and selling securities to the public without a seperate prospectus ie, a single prospectus is used for multiple offerings. It can be used both for primary and secondary offerings, It is a process which is authorized by the US Securities and Exchange Commission under Rule 415

By using Shelf registration companies get the flexibility in planning their capital requirements, they are also be able to avoid issuing securities when the market conditions are unfavourable

shelf registraion is motre common in case of bonds than equity, both bonds and equity are procurement of money from public the major difference is that equity refers to the owners funds and the other one is just a borrowing from the public.

shelf registration has a limitation that only primary shares can be offered by using this, offering of secondary shares are not permitted and also issuing of share will greatly depend upon so many market conditions so that a prosprctus and clearence which will be used for an issue will not be apt in case when a new issue is made. In case of bonds this limitation is not there

the major advantage of shelf registration is that, it allows immediate access to the market without need to wait for any kind of clearences