Table 8.1Equity issues by London Stock Exchange listed businesses
Issues by newly listed businesses
Year 2000 2001 2002 2003 2004 2005 2006 2007Total value (£m) of which: 11,047 5,994 4,893 2,395 3,431 5,966 8,415 7,613
Public offer (%) 51 25 70 81 61 53 38 57
Placing (%) 41 21 18 11 28 36 57 40
Combination of public offer and placing (%) 8 54 12 8 11 11 5 3
100 100 100 100 100 100 100 100Issues by seasoned listed businesses
Year 2000 2001 2002 2003 2004 2005 2006 2007Total value (£m) of which: 10,144 13,413 11,531 4,902 7,982 7,620 12,865 8,840
Public offer (%) 4 6 4 3 4 11 9 13
Placing (%) 48 38 31 20 58 43 40 71
Combination of public offer and placing (%) 12 8 9 20 13 10 5 8
Rights issue (%) 36 48 56 57 25 36 46 8
100 100 100 100 100 100 100 100Source: London Stock Exchange Main Market Statistics
Chapter 8 • Sources of long-term finance
Technically there are two ways of making public issues:l The issuing business can sell the shares to an issuing house, usually a merchant
bank that specialises in such work. The issuing house then sells the shares to the
public. This is known as an offer for sale.
l The issuing business sells the shares direct to the public. Often such businesses are
advised by a merchant bank on such matters as the pricing of the issue. Here the
offer is known as an offer by prospectus.
Irrespective of which of these methods is used, the general procedure is the same.
Basically, the shares are advertised in newspapers and/or elsewhere. The advertise-
ment is required, by law and by the regulations of the LSE, to give a large volume of
detailed information. This is very expensive to prepare, including, as it does, reports
from independent accountants and such like. The objective of including such volumin-
ous and detailed information is to protect the public from the type of sloppy and
sometimes fraudulent claims that were made by businesses’ managements in the ear-
lier days of the LSE.
As Table 8.1 shows, public issues are very popular, with newly listed businesses
accounting for an average of 55 per cent of new equity financing for this group during
the period 2000 to 2007. This contrasts with an average of only 7 per cent of total new
equity raised by seasoned businesses.Placings
There is a variation on the issuing house selling the shares to the general public by
advertising. This is known as a ‘placing’. Here the issuing house ‘places’ (that is, sells)
the shares with several of its own clients, such as insurance businesses and pension