A stable, well-functioning financial market for allA stable, well-functioning financial market for allThe process for new issues and initial public offerings
This report describes the process that precedes a new issue or initial publicoffering. It clarifies various phenomena that investors should be aware of whenparticipating in this type of transaction, allowing them to understand andevaluate the offer in its entirety.
Conducting a new issue or initial public offering* is a relatively extensive project which involves several external and internal actors in addition to the securities institution's corporate finance department. The procedure related to a new issue and its administration is complicated and demands a great deal of knowledge from investors if they are to understand the consequences of investment in the security. Not only must the investor take account of the issuing company's financial position and development, they must also take into consideration the execution of the issue itself, which, in extreme market conditions, can have a great effect of the short-term development of the investment.
On many occasions private investors have found it difficult to understand all of the terms and conditions in an offer, leaving them feeling unfairly treated. In cases where an offer is made to the general public, the information provided alongside the transaction is of vital importance.** At the same time the industry must take account of the stringent requirements in the legislation for discretion and confidentiality, which can hinder transparency and openness. Where ignorance meets silence there is a risk of a lack of confidence – a situation aggravated by the fact that the interests of several parties must be satisfied in the transaction.
In conjunction with this survey we have carried out a review of how the securities institutions handle the various components of the new issue or quotation process. The results of this study are presented in the report New issues and initial public offerings (FI 2007:12).
Authors: Robert D'Agostino, Patrik Hellgren, Veronica Fröderberg
*Refers to a company which has not previously been traded publicly on a stock exchange or
other authorised or unregulated market place, but which intends to start trading as a part of the transaction.
**Information disclosure is regulated in the Financial Instruments Trading Act (1991:980) of
Commission Regulation (EC) 809/2004 regarding information disclosure in prospectuses.
