What are New Issues?
New Issues are offerings of securities that allow investors to buy shares or debt in a company before they trade on the open market and are usually introduced by companies to raise capital to expand their business, pay down debt, or finance other corporate activities.
The two main types of New Issues available through Barclays Stockbrokers are most commonly known as either Initial Public Offerings or IPOs for short, as well as Fixed Income Retail Bonds. Both types of New Issues described here are investments which put your capital at risk. You can lose all or part of what you invest.
What are IPOs?
A New Issue is sometimes called an IPO or a flotation. Generally, it marks the first sale of ‘stock’ (shares) by a privately owned company in order to gain listing on the stock market. It can also be the issue of additional shares in an existing company.
Investing in New Issues carries a significant degree of risk and the value of your investment may fall significantly after the security is quoted on the open market.
How do IPOs work?
- Before any official announcement is made, there tends to be a lot of press comment around companies who take part in an IPO.
- The initial official announcement comes from an Intention to Float (ITF) notice to a recognised stock exchange such as the London Stock Exchange (LSE). The ITF announcement typically includes the company’s investment highlights and details of who can invest, i.e. institutions, professional investors and / or private retail investors. Worth noting, at this stage investors cannot place orders in the IPO.
- The company will then officially announce the launch of their IPO, issuing a Prospectus, Pricing Notification and Summary Prospectus. Clients should only invest in an IPO once they have read the Prospectus and fully understand the risks.
- At launch the company will also confirm the ‘offer period’ of the IPO. This is the period of time you have to invest at the launch price before the company shares are launched on a recognised stock exchange (e.g. London Stock Exchange). The offer period is an indication and the offer can close early due to high demand.
- When the offer period closes the company will confirm investors’ proportionate allocation of shares in the IPO and confirm the company’s launch in the market. If an offer is over subscribed, investors may receive less than their original request. Companies normally dictate a set allocation policy for investors. In instances where no set policy is provided, we will use our allocation policy.
- Once the company has launched on the market it will trade like an ordinary share and a buy / sell price will be made available. This could be more or less than the price paid in the IPO and is generally influenced by a number of factors. These include supply and demand, company performance and general market conditions which might affect the underlying sector or geography of the company.
How to invest in IPOs
Simply go online or call us to invest through an Investment ISA, SIPP, MarketMaster® investment account or a Pension Trader Account. For company accounts, the firm’s jurisdiction of incorporation must be in the UK, Channel Islands (Jersey and Guernsey) or Isle of Man in order to participate in the offer.
The minimum investment amount is covered within the company Prospectus, but typically starts from £1,000. Be aware that the value to you of the tax benefits around ISAs and pensions depends on your individual circumstances, and that the rules relating to them could change in the future.
What are New Issue Retail Bonds?
When you invest in New Issue Retail Bonds, also known as Fixed Income New Issues, you are effectively lending money to companies in return for a pre-determined interest payment rate. Your investment is also due to be repaid on a specified end date.
New Issue Retail Bonds launch on the Order Book for Retail Bonds (ORB) through the London Stock Exchange (LSE). They are usually considered lower risk than investing in the shares of the company. This is because if a company is wound up, bondholders will be paid before shareholders, so there is less chance of losing your money. However you can get back less than is due to you or lose all of your investment and no compensation scheme will cover this.
How do New Issue Retail Bonds work?
- Companies looking to issue New Retail Bonds will announce to the market that they are launching a new bond, confirming the rate of interest, the loan period, credit rating and other key aspects of the bond.
- They will also produce a Prospectus and Information Booklet to support each bond. This gives investors key information about the investment and, in particular, the asset or assets that will provide collateral. You should only invest in a New Issue Retail Bond once you have read the supporting Prospectus and fully understand the risks.
- At launch the company will also confirm the ‘offer period’ of the bond. This is the period of time you have to invest before the bond enters the secondary market i.e. before a market commences in bonds that have already been issued. The offer period is an indication only and New Retail Bonds can close early due to high demand with only 24 hours notice given to investors in some instances.
- When the offer period closes, the company will confirm the investors’ allocations of the bond and the date it will launch on the market. If a bond is over subscribed, investors may receive less than their original request. View full details of our allocation policy.
- Once the bond has launched on the market it will trade like an ordinary retail bond and a buy / sell price will be made available. This might be more or less than the price that it was issued at and will depend on factors such as changing interest rates, company performance and news, as well as the credit rating of the company issuing the bond.
- You should carefully consider the credit risk of the issuer of new Retail Bonds. If they fail to meet their obligations, you may get back less than is due to you and no compensation scheme will cover this.
How to invest in New Issue Retail Bonds
You can simply go online or call us to invest through an Investment ISA, SIPP, MarketMaster® investment account, or a Pension Trader Account. For company accounts, the firm’s jurisdiction of incorporation must be in the UK, Channel Islands (Jersey and Guernsey) or Isle of Man in order to participate in the offer. Remember that the value to you of the tax benefits around ISAs and pensions depends on your individual circumstances, and that the rules relating to them could change in the future.
The minimum investment typically starts at £2,000 with denominations of £100 thereafter. One share in the bond is usually equal to £1.
Barclays Stockbrokers does not endorse any particular security and the decision to deal in new issues is on an execution-only basis. If you are unsure whether these investments are suitable for you, please seek independent advice.