What is an New Issue or IPO?
A new issue or an IPO is the sale of additional shares or a company listing its shares on the stock exchange for the first time. Renowned companies listing for the first time can often lead to high demand for the issue and therefore participation in the IPO may be limited for retail investors. Stock is usually offered to institutions such as private equity houses, asset managers and pension funds.
Potential Benefits of a New Issue
New Issues are not subject to stamp duty. So this means shares can often be priced at a discount to increase the attraction of the stock. In this event, high demand may lead to an initial short term rise, although this is not guaranteed and new issues may fall in value when listed on the market.
Potential Risks of a New Issue
Investments can fall in value and you may lose some or all of the amount you have invested. Additionally, most new issues and IPOs have extreme time constraints, operating with an application period of two weeks or less. Please note that the offering can be closed early, scaled back or withdrawn depending on demand. New issues do not always come to market at a premium.