The beginner’s guide to new issues1
Companies that go public do so for a variety of reasons, including to raise capital for future business expansion, to pay down debt or to finance other corporate activities.
When going public for the first time, these companies offer an issuance of securities, or initial public offering (IPO) to the public. Companies who have already gone public may offer an additional issuance of securities, which is known as a secondary offering.
Every investor has heard numerous stories of people who have gotten wealthy with IPOs. A little caution is advised. Not all IPOs are rockstars. The fact is, IPOs are speculative investments and may not be appropriate for every investor. While an IPO might in some circumstances provide exceptional returns, especially when markets are up, there’s no guarantee your investment will be profitable.
Remember, investing in new issues is like buying any investment - you should do your research before you buy. Be sure to review the prospectus and/or term sheet, as they contain important information about the issuing company and the offer.
New issues purchased through Scotia iTRADE® are commission-free.
Bought deal vs marketed deal
A bought deal is a firm commitment by an underwriting group to purchase an entire issue outright from the issuer. Then, all members of the underwriting group resell the issue to individual investors, like you, at a pre-set price.
With a marketed deal, there’s no commitment made by the underwriting group to purchase the issue outright from the issuing company. The issue can begin with a pre-set price, an indicative price range or even a To Be Announced (TBA) price - priced later based on market context. Marketed deals are typically marketed over a period of several days or weeks to potential investors on a best efforts basis by the underwriters.
Placing an indication of interest
An indication of interest (IOI) represents your firm intention to purchase a specific number of shares in a new issue, subject to any applicable securities regulations.
What happens if demand for a new issue exceeds supply?
Placing an indication of interest does not guarantee that you will get access to shares since new issues are allocated on a first come, first serve basis. When you place an indication of interest, you must be willing to accept a full fill, partial fill or no fill on your order. Once the allocation is complete, a confirmation email will be sent to you with your order details.
What Scotia iTRADE offers
Scotia iTRADE participates in hundreds of Canadian new issues annually. Our sector coverage is vast and includes technology, agriculture, commodities and healthcare, to name a few. We also offer you a wide range of preferred shares, common shares, trust units, limited partnership units, convertible debentures and more.
Although new issues can be very attractive, they come with potential risk like all other investment choices. Scotia iTRADE does not endorse any particular investment by making it available to our clients; as with any investment you make through Scotia iTRADE, you must determine whether a new or secondary issue of equity or debt is consistent with your investment objective(s) and risk tolerance. Please review the offerings prospectus and or term sheet carefully before placing your indication of interest.
This publication has been prepared by Scotia Capital Inc. (“Scotia iTRADE”) and is intended as a general source of information and for educational purposes only and should not be considered as personal and/or specific financial, tax, pension, legal or investment advice. This publication does not take into account the specific personal, financial, legal or tax situation or particular needs of any specific person. No information contained in this publication constitutes a recommendation by Scotia iTRADE to buy, hold or sell any security, financial product or instrument discussed therein. The information contained in this publication neither is nor should be construed as an offer or a solicitation of an offer by Scotia iTRADE to buy or sell securities or to follow any particular investment strategy. Scotia iTRADE does not make any determination of your general investment needs and objectives, or provide advice or recommendations regarding the purchase or sale of any security, financial, legal, tax or accounting advice, or advice regarding the suitability or profitability of any particular investment or investment strategy. You will not solicit any such advice from Scotia iTRADE and in making investment decisions you will consult with and rely upon your own advisors regarding the appropriateness of implementing strategies before taking any action based upon the information contained in this publication. Opinions and projections contained in this publication are our own as of the date hereof and are subject to change without notice. While care and attention has been taken to ensure the accuracy and reliability of the material in this publication, neither Scotia iTRADE nor any of its affiliates make any representations or warranties, express or implied, as to the accuracy or completeness of such material and disclaim any liability resulting from any direct or consequential loss arising from any use of this publication or the information contained herein. This publication and all the information, opinions and conclusions contained herein are protected by copyright. This publication may not be reproduced in whole or in part without the prior express consent of Scotia iTRADE.