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New issue |
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New issueStrictly, the issue by a company of new shares, enlarging its share capital and often the number of shareholders on its register. But new issue is often used to refer to an Initial Public Offering (IPO) - the process in which a company is admitted to the Official List of the LSE (or to AIM) for the first time and issues new shares to the public as part of that exercise. New issues which are also IPOs can be handled in four ways:as an 'offer for sale' direct to the public at large, where the shares are offered at a predetermined price.as a tender offer, where the public are invited to make an offer for the new shares, and allocations are made on the basis of price. as a private placing to institutions, which effectively means that private investors can only get shares in the secondary market.as an 'Introduction' where the company is admitted without issuing any new shares.New issueSecurities that are publicly offered for the first time, whether in an IPO or as an additional issue of stocks or bonds by a company that is already public.New issue Similar MatchesJunior issueJunior issueA debt or equity issue from one corporation over which the issue of another firm takes precedence with respect to dividends, interest, principal, or security in the event of liquidation. Secondary issueSecondary issue(1) Procedure for selling blocks of seasoned issues of stocks. (2) More generally, sale of already issued stock. Seasoned issueSeasoned issueIssue of a security for which there is an existing market. Related: Unseasoned issue. Scrip issueScrip issueScrip issues are born out of an accounting quirk. When a company has retained profits, these appear on its balance sheet as 'Profit and Loss Account Reserves'. If the company has been trading profitably for some time, the reserves can far outweigh the Ordinary Share Capital of the company as a proportion of total Shareholders' Funds.For instance, a company might have Shareholders' Funds as follows:Ordinary share capital (10p par value x 500 million shares in issue) = £50 millionProfit and Loss Account reserves = £250 millionSuppose that this company has a share price of 900p which is quite 'heavy' for a UK company. The directors of the company might decide that the shares would be more marketable if the share price was lower. One way to achieve this is to have a scrip issue, the basis of which is that part of the P&L Reserves are converted into new share capital.In the above example, the company might convert £50 million of Reserves into new shares.It creates 500 million new shares at 10p par valueIt uses £50 million from the Reserve account to make them 'fully paid'.It distributes the new shares to existing shareholders pro rata to their existing holdingIn this case, there were 500 million shares before the scrip and 500 million new shares have been created, so shareholders would get one new share for every share they already hold.After the scrip issue shareholders funds would look like this:Ordinary share capital (10p par value x 1 billion shares in issue) = £100 millionProfit and Loss Account reserves = £200 millionShareholders should not pop the champagne corks though. True, individually they have twice as many shares as they had before. But total shareholders funds haven't changed. They are still £300 million. All that has happened is that £50 million has been moved from one row in the balance sheet to another. The price of the shares will be adjusted to reflect the fact that there are twice as many in issue. Instead of being 900p it will halve to 450p.The other point to note is that if the company pays the same dividend per share after a scrip issue as it did the previous year, it will in fact be paying out a lot more. So the dividend per share will usually drop after a scrip issue. Vanilla issueVanilla issueA security issue that has no unusual features. Further SuggestionsissuerDate of issue Currency no longer issued Foreign targeted issue Issue bargain issue rights issue issue Unseasoned issue When issued (WI) Cheapest to deliver issue Current issue Original issue discount debt (OID debt) capitalisation issue New issues market Issued share capital bonus issue Pre sold issue Euroequity issues entitlement issue Benchmark issue Last Mile Issue Original Issue Discount securities (OIDS) issued share capital seasoned issue |
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