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

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.   

 

To learn more, sign into your Scotia iTRADE® account and view the new issue center under the Trade tab. 
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