Why it is carried out
A third-party allotment may be used as part of a business or capital alliance, or as a way to accept funding from a supporting party during a corporate turnaround. Compared with a public offering, the process can move more quickly, but because the recipient is limited, the reasonableness of the issue terms tends to be scrutinized more closely.
What to keep in mind
For existing shareholders, key points to check are the nature of the allottee (the substance of the alliance, the intent behind the support, and so on) and whether the issue price is reasonable relative to the market price. If the allotment ratio is large, existing shareholders' voting-rights ratio can decline significantly, so it is worth reviewing the disclosure carefully.