A public invitation to apply for stock in a company by a sponsoring intermediary, such as bank or broker, to buy new or existing securities based on information contained in a prospectus. It contrasts with an offer for subscription which is an invitation to subscribe direct from the issuer.
A method of bringing a company to the stock market by selling shares in a new issue. The company sponsor offers shares to the public by inviting subscriptions from investors.
A situation in which a company advertises new shares for sale to the public as a way of launching itself on the Stock Exchange
There are two main ways for a company to list new shares
1) By an offer for sale, by fixed price - the sponsor fixes the price prior to the offer, which is a public invitation by a sponsoring intermediary such as an investment bank.
2) By an offer for subscription, ( or direct offer, which is a public invitation by the issuing company itself ) by tender - investors state the price they are willing to pay. A strike price is established by the sponsors after recieving all the bids. All investors pay the strike price.
The offer can be made at a price that is fixed in advance or it can be by tender where investors state the price they are prepared to pay. After all bids are received, a strike price is set which all investors must pay.
A prospectus containing details of the sale must be printed in a national newspaper.
The Securities and Exchange Board of India (SEBI) said on a specific day that any advertisement given by companies going for offer for sale through the stock exchange mechanism should be restricted to such details of the offer that is given to the stock exchange in this regard. "It is clarified that the contents of the advertisement, if any, to be issued ....shall be restricted to the contents of the notice as given to the stock exchange," SEBI said in a circular. The contents of the stock exchange announcement are laid down in an earlier circular.
Accordingly, sellers shall announce the intention of sale of shares at least one clear trading day prior to the opening of offer. This announcement should clearly contain details such as date and time of the opening and closing of the offer, allocation methodology i.e. either on a price priority (multiple clearing prices) basis or on a proportionate basis at a single clearing price, number of shares being offered for sale and floor price
“ When companies have shares to offer for sale it may mean they are launching their IPO and recently became a publicly traded company. ” A method of bringing a company to the stockmarket by selling shares in a new issue. The company sponsor offers shares to the public by inviting subscriptions from investors.
The process of listing for the first time is known as the 'primary market'. The most common way for a company to come to market is by an 'Offer for Sale'.
A prospectus containing details of the sale must be printed in a national newspaper.
Stagging
Low offer prices encourage investors to 'stag' an issue, applying for more shares than they want and selling them for an instant profit as soon as the market opens. Stagging was particularly good when companies only required payment after shares had been allocated. Now that they usually ask for money with your application, it's less attractive.
Nevertheless, stagging is still a feature of new issues, and you will see it cited as a factor in first day trading. Eg AFX's report on Zen Research said 'The hard disk developer finished the day up 27 from its flotation price of 150 pence to 177, having fallen back from an earlier high of 200 as traders stagged the issue. The stock was the second most traded on the smaller caps, with 22.46 mln transactions'.
Oversubscription
If an issue is oversubscribed, the company will usually allot each subscriber a percentage of the shares they wanted, and return a proportion of the subscription money.
Sometimes the offer stipulates that applications for large numbers of shares will be scaled back or rejected completely. This was what happened with the big UK privatisations, and investors who tried to get round the rule by making multiple applications in the names of children and pets ran the risk of prosecution.
Undersubscription
Most new issues are guaranteed by 'underwriters' - merchant banks who promise to buy any shares not taken up by the public, in return for a fee from the company. This gives the company the comfort of knowing their listing will get off the ground.
Occasionally, the underwriters have to act - as they did when BP floated in 1987 at the time of the crash. The underwriters had to take up huge numbers of unsold shares, at fixed prices, then offload them onto the market at much lower prices and absorb the loss.
A method of bringing a company to the stock market by selling shares in a new issue. The company sponsor offers shares to the public by inviting subscriptions from investors.
A situation in which a company advertises new shares for sale to the public as a way of launching itself on the Stock Exchange
There are two main ways for a company to list new shares
1) By an offer for sale, by fixed price - the sponsor fixes the price prior to the offer, which is a public invitation by a sponsoring intermediary such as an investment bank.
2) By an offer for subscription, ( or direct offer, which is a public invitation by the issuing company itself ) by tender - investors state the price they are willing to pay. A strike price is established by the sponsors after recieving all the bids. All investors pay the strike price.
The offer can be made at a price that is fixed in advance or it can be by tender where investors state the price they are prepared to pay. After all bids are received, a strike price is set which all investors must pay.
A prospectus containing details of the sale must be printed in a national newspaper.
The Securities and Exchange Board of India (SEBI) said on a specific day that any advertisement given by companies going for offer for sale through the stock exchange mechanism should be restricted to such details of the offer that is given to the stock exchange in this regard. "It is clarified that the contents of the advertisement, if any, to be issued ....shall be restricted to the contents of the notice as given to the stock exchange," SEBI said in a circular. The contents of the stock exchange announcement are laid down in an earlier circular.
Accordingly, sellers shall announce the intention of sale of shares at least one clear trading day prior to the opening of offer. This announcement should clearly contain details such as date and time of the opening and closing of the offer, allocation methodology i.e. either on a price priority (multiple clearing prices) basis or on a proportionate basis at a single clearing price, number of shares being offered for sale and floor price
“ When companies have shares to offer for sale it may mean they are launching their IPO and recently became a publicly traded company. ” A method of bringing a company to the stockmarket by selling shares in a new issue. The company sponsor offers shares to the public by inviting subscriptions from investors.
The process of listing for the first time is known as the 'primary market'. The most common way for a company to come to market is by an 'Offer for Sale'.
- The company publishes a prospectus describing its business, who its directors are, what its financial position is, and what profits it thinks it is going to make.
- The prospectus announces the issue of new shares, sets an offer price for the shares, and invites subscriptions.
- Offer prices are often pitched low to make sure the issue is successful.
- Offer for sale by fixed price - the sponsor fixes the price prior to the offer.
- Offer for sale by tender - investors state the price they are willing to pay.
A prospectus containing details of the sale must be printed in a national newspaper.
Stagging
Low offer prices encourage investors to 'stag' an issue, applying for more shares than they want and selling them for an instant profit as soon as the market opens. Stagging was particularly good when companies only required payment after shares had been allocated. Now that they usually ask for money with your application, it's less attractive.
Nevertheless, stagging is still a feature of new issues, and you will see it cited as a factor in first day trading. Eg AFX's report on Zen Research said 'The hard disk developer finished the day up 27 from its flotation price of 150 pence to 177, having fallen back from an earlier high of 200 as traders stagged the issue. The stock was the second most traded on the smaller caps, with 22.46 mln transactions'.
Oversubscription
If an issue is oversubscribed, the company will usually allot each subscriber a percentage of the shares they wanted, and return a proportion of the subscription money.
Sometimes the offer stipulates that applications for large numbers of shares will be scaled back or rejected completely. This was what happened with the big UK privatisations, and investors who tried to get round the rule by making multiple applications in the names of children and pets ran the risk of prosecution.
Undersubscription
Most new issues are guaranteed by 'underwriters' - merchant banks who promise to buy any shares not taken up by the public, in return for a fee from the company. This gives the company the comfort of knowing their listing will get off the ground.
Occasionally, the underwriters have to act - as they did when BP floated in 1987 at the time of the crash. The underwriters had to take up huge numbers of unsold shares, at fixed prices, then offload them onto the market at much lower prices and absorb the loss.
