IPOs and new issues explained

Like IPOs, retail bonds and new issues are a way for companies to raise capital, usually as part of plans to expand or refinance debt.

The incentive for investors is the payment of an annual return, typically paid once or twice a year.

Depending on the type of bond, the returns offered can be fixed, floating or index linked. As with any investment, the amount you invest is not protected and companies can fail so it is important to assess how much risk is involved by lending money to a company via a bond.

New issues concern companies which are already publicly listed and are creating a new share issue to raise funds.

Unit Trusts and Funds can also come to the market to raise capital. They follow a similar process to other IPOs but as well as publishing a prospectus also provide a Key Investor Information Document (KIID) which sets out its investment strategy in detail.

RETAIL BONDS EXPLAINED

IPOs are available, or open, for a fixed period usually of two weeks, known as the offer period.

To apply, you ‘subscribe’ to the IPO by nominating an amount you would like to invest in the company, for example £5,000. You also nominate which EQi account you would like the IPO shares to be held in once bought. At this point the money is earmarked in your account as ‘spent’ and cannot be invested.

Once applications are finalised, the offer period ends, or is closed. If the IPO does not receive enough interest, the IPO can be halted, at which point we will let you know.

If you receive a full, or partial allocation, you will receive a contract note, which is a standard notification of a purchase.

Once the IPO is closed, and shares allocated, shares can be bought and sold on the stock market.