New Issues and IPOs

A New Issue or an IPO (Initial Public Offering) is a method of bringing a company to the market to raise money in return for a transfer of control to shareholders.

The IPO market is open for well-managed companies that are sensibly priced and offer a compelling growth story for their investors.

There are many reasons why companies offer shares to the public ... it could be to raise new capital ; to widen their shareholder base ; to gain a stock market quote for liquidity ; to use 'paper' to make acquisitions or simply to raise their public profile.

It is not always possible for the average retail investor to participate in New Issues or IPOs as the EU Prospectus Directive dictates that in order to offer shares to the public, the company must issue a prospectus approved by the Financial Conduct Authority (FCA). This can be costly. As a result some companies choose not to issue a prospectus and offer shares to professional investors and institutions only.

Eton Capital Group is delighted to have brought a range of dynamic, innovative companies to market with significant success.

Investor benefits

  • Shares are often attractively priced to appeal to investors.
  • The underwriters are, naturally, looking to get a good price for the underlying owner but usually investors can expect to acquire shares at a discount to the market value, thereby taking advantage of an early opportunity to invest in a growing company.
  • High demand may lead to new issues being oversubscribed which in turn is likely to see good demand in the market once the shares are trading freely, resulting in the share price being pushed upwards.
  • New issues are exempt from stamp duty.
  • The issuing company may also include some additional perks for 'founding shareholders' e.g. discounts on their goods/services.
  • Possible risks

  • Where an issue is very popular it is likely applications will have to be 'scaled back'. The issuers will consider how best to distribute shares in the interest of all applicants.
  • Ahead of an issue there may be a lack of independent historical detail about the company. It is advisable to access the prospectus made available during the offer period and also research general press comment.

Mitigation

Our experienced and integrated team of research analysts, corporate financiers and equity sales specialists allows us to project manage all aspects of the float process. We a demonstrable track record of efficient and successful IPO delivery. Our approach involves significant, fully contingent up-front advice from the Eton Capital Group team and test marketing to determine investor appetite and pricing. The result is to provide all stakeholders in the process with high levels of transparency and confidence in a successful outcome.

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