Terri-Tech Inc. is a small company made up of two twenty-something software developers. Terri-Tech requires financing to market an innovative application. The dealer with whom the developers have worked has suggested that the developers offer a new issue of shares by means of a direct invitation to the public, through an advertisement in the Globe and Mail Report on Business. The dealer will not assume the risk of the issue being bought. What is the name of this method of equity financing?

Question

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The method of equity financing described in the scenario is a best efforts deal, where the company makes a direct invitation to the public to purchase shares, but the dealer does not assume the risk of the issue being bought. Private placement is when the shares are offered to a select group of investors, a bought deal is when an underwriter buys the entire issue of shares from the company, a tender issue is when the company offers to buy shares back from existing shareholders, and a reserve deal is not a commonly used term in equity financing.