What is an IPO?

What is an IPO or retail bond issue?

An IPO is the first sale of a company’s shares to the public. This is done by listing the shares on a stock exchange such as the London Stock Exchange and is also known as a flotation.

An IPO is also referred to as a public offering as the sale of shares is to the general public, rather than directly to select institutional or large investors which is known as a private placement.

Companies choose to offer shares to the public for a number of reasons including to raise finance for growth opportunities, widen the company’s shareholder base and raise the profile of the company.

Another popular way for a company to raise finance is to issue retail bonds. The company borrows cash from investor at a fixed rate for a set period. However retail bonds should not be confused with cash bonds issued by banks or building societies. They can be traded like shares on the London Stock Exchange and the value of them can go down as well as up.

Investment trusts can also issue additional shares and this process is referred to as an Offer for Subscription or Placing, this increases the size of the existing investment trust.

To take part in an IPO or retail bond issue you will need to open an account first. For more information on IPOs please read our guide.

How much does it cost to invest in IPOs?

You will normally not pay any dealing charges when taking part in an IPO. We will receive an intermediary fee based on the aggregate value of applications made by our customers for acting as an appointed intermediary. However if we do not receive an intermediary fee we will apply our normal dealing charge.

Stamp Duty and PTM Levy are not payable on IPOs.

Please remember that investing in IPOs carries a high degree of risk. The value of your investment may fall significantly after the security is quoted on the open market and you may not get back all the money that you invest. Any decision to invest in an IPO, share offer or retail bond launch should be made solely on the basis of the information contained in the Prospectus, and any sup- plement thereto. We do not offer advice on the suitability of any IPOs for you. Should you require financial advice please consult a suitably qualified financial adviser. Any notification of an IPO on our website is not an endorsement of the issue, nor is it solicitation for interest in the issue.