When a company wants to raise new money from shareholders it has a choice about how it goes about doing so. One option is an offer for sale to all potential shareholders, institutional and private. This takes time to organise as the regulations are quite strict and there are potentially many application forms to process. There is also some uncertainty about whether retail investors will commit to buy new shares. So unless a firm has a good reason to do it a football club wanting to offer shares to fans, for example most firms go for a placing instead.
This is where selected institutions are phoned by a firm's advising investment bank and offered blocks of shares they are quite literally placed'. This is usually a quicker and cheaper way to raise the same funds. As part of a placing, the advising bank will often organise a roadshow', where it visits the biggest potential investors (pension funds, for example) to market the new shares.
MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
-
How retirement pots risk running out 11 years early if inflation remains highPension savers could find their retirement income may not last as long as they anticipated over fears that inflation may not slow down
-
How extending stealth tax freeze would cancel out pensioners’ Winter Fuel Payment by 2030Pensioners relying on just the full new state pension face paying tax on their income within a few years, as the payment rises but thresholds remain frozen
