Question

C.K. Tang used three different privatisation methods. Explain how these different methods work and the pros and cons of these different methods from the viewpoints of the shareholder(s) wanting to take a company private versus minority shareholders who may prefer that the company remain listed.

Answer 1

methods of privatisation and there pros and cons

initial public offer	strategic sale	SALE TO FOREIGN FIRMS
1. most favoured method- under this mthod the equity holdings of public sector undertaking are sold to private retail invetors.	it is a method in which the govt. decides to sell PSUs shares to a strategic partner	UNDER THIS METHOD GOVT DECIDES TO SELL THE PSU TO THE FOREIGN FIRMS
PROS- 1. ENSURES WIDE PARTICIPATION OF RETAIL INVESTORS.	pros- performance of PSU is expected to improve.
LIKELY TO FACE less resistance from PSUs stakeholders	helps in infusion of capital and modernisation of the PSU.
can be used to offer shares to the employees	IMPORTANT FOR COUNTRIES HAVING LESS DEVELOPED CAPITAL MARKET.
suitable when govt. wanted to raise financial resouces
	cons- political corporate nexus resistance from employees non transparent process