New issues

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1. After Sid - a short history of the new issues market

'New issues' are issues of shares made when companies launch on the stock market and become 'quoted' for the first time. In the UK, this event is referred to as a 'flotation', in the US as an 'initial public offering', or IPO for short. The American term is now used increasingly here in the UK.

It was the flotations of Jaguar, Enterprise Oil and British Telecom back in 1984 that kick-started a surge in the number of UK private shareholders from three million then to more than 12.5 million today. For nearly four years, private shareholders enjoyed a new issue bonanza, while the Thatcher government sought to widen share ownership by privatising state-run businesses at knockdown prices. This was the Age of Sid - the mythical investor created by the ad campaign for the British Gas privatisation, who symbolised 'shares for all'.

Then, in October 1987, the Black Monday crash upset a government offer of shares in BP. Wall Street and City institutions that had promised to 'underwrite' the issue, i.e. buy any unwanted shares, had to step in and do just that on a massive scale. At the same time, the deregulation of the City known as 'Big Bang' was eliminating many smaller brokers and banking firms and leading to a consolidation of business in the hands of fewer, larger institutions.

These events marked the end of the Age of Sid. The balance of interests swung away from private investors and back towards the professionals. The political will to extend private ownership weakened under John Major and has disappeared altogether under Tony Blair. Since 1996, most firms coming to market have been under no obligation to offer new shares to private investors. Increasingly, the most attractive new issues have been reserved for City institutions via placings. But now there are signs that the pendulum may at last be swinging back again.

• The boom in technology stocks enticed swarms of new private investors into the market, and enabled some to make serious money.
• The explosion in online trading has set off a chain reaction of new services offering ever more data and cheaper and cheaper dealing. Both these developments are encouraging companies planning flotations to take more account of private investors.
• Finally, the ease of communication on the internet is enabling new types of financial intermediaries to forge links between these companies and private investors, by offering new issues directly to the public.

All these trends make this a good time to take a fresh look at the IPO market.

1. After Sid - a short history of the new issues market 2. Do new issues offer good value? 3. Types of new issue 4. Applying via brokers and intermediaries 5. The prospectus 6. What to look for in the prospectus (1) - directors and advisers 7. What to look for in the prospectus (2) - standard company analysis 8. What to look for in the prospectus (3) - blue-sky company analysis 9. Making your application 10. Stagging 11. A word on warrants 12. A tale of two issues 13. Conclusion

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