What is a New Stock Issuance?

When a company wants to raise capital, it can issue new shares of stock to investors. These can be offered through:

• Initial Public Offerings (IPOs):
  
  • A company’s first time selling shares to the public.
    
  • Listed on the Johannesburg Stock Exchange (JSE).
    
  • Open to all investors who meet the minimum requirements.
    
• Private Placements:
  
  • Shares are offered to select investors, like institutions or high-net-worth individuals, rather than the general public.
    
  • Often come with specific investment terms.
    

Both IPOs and private placements are opportunities for investors to buy stocks at an early stage—sometimes at a discount price.

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How to Subscribe for New Stocks

1. Through an IPO

Participating in an IPO on the JSE typically involves:
✅ Checking Announcements:

• IPOs are announced through company press releases, financial news, and JSE filings.
  ✅ Broker Account:
  
• You need a brokerage account with a JSE member firm (e.g., PSG Wealth, Standard Bank Online Share Trading).
  ✅ Application Process:
  
• Your broker will provide a prospectus and application forms.
  
• Fill in the number of shares you want to apply for, price limits (if any), and submit the application.
  ✅ Funding:
  
• Ensure your account is funded to cover the purchase amount before the IPO closes.
  

2. Through a Private Placement

Private placements are usually arranged directly through the company or an investment bank. Steps include:
✅ Invitation:

• Companies will reach out to select investors or announce opportunities via brokers.
  ✅ Subscription Agreement:
  
• You’ll sign documents outlining the terms and conditions.
  ✅ Due Diligence:
  
• Review financials, risks, and potential returns carefully.
  

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Understanding Discount Price vs. Latest Price

• Discount Price:
  
  • Typically offered in IPOs or private placements to attract investors.
    
  • Meant to reflect the “early-bird” advantage.
    
• Latest Price:
  
  • The price the stock trades at once it’s listed on the JSE.
    
  • May be higher (if demand is strong) or lower (if market sentiment changes).
    

Always compare the discount price to comparable stocks and the company’s fundamentals to judge whether the price is attractive.

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Risks and Considerations

Before subscribing to new stocks, ask yourself:
⚠️ Is the company’s business model solid?
⚠️ Are you prepared for possible price volatility? IPOs can be especially volatile in their early days.
⚠️ Have you read the prospectus carefully? This document contains crucial information about the company’s operations, risks, and financial health.
⚠️ Are there lock-up periods? Some IPOs or private placements restrict you from selling your shares for a period of time.

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The South African IPO Landscape

South Africa’s IPO market can be smaller than those in larger economies, but it still offers solid opportunities:

• Mining and financial services often lead new listings.
  
• Many IPOs are driven by companies seeking expansion capital or new investors.
  
• Private placements are commonly used by mid-sized companies seeking growth funding.
  

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Common Questions from Investors

Q: Do I need a lot of money to participate in an IPO?
A: Not necessarily. Minimum investment amounts vary by broker and IPO terms. Some brokers allow participation from as low as R1,000.

Q: Are IPOs always profitable?
A: No. Some IPOs underperform, while others can deliver significant returns. Always research the company’s fundamentals.

Q: Can I sell my shares immediately after an IPO?
A: Usually, yes, but some IPOs may have lock-up periods that restrict selling for a set time (e.g., 3-6 months).