The following information relates to how shares are issued on
the London Stock exchange (LSE). Prior to a business being able to launch shares
on the LSE, a business needs to attain Public Limited Status (Plc), details of
Plc status can be found in the UK Specific
Data section.
We shall now briefly discuss five ways shares can be issued onto
the LSE:
INTRODUCTION: This involves the acquisition of a
listing, with permission from the LSE for shares to be traded on the stock
exchange. The stock exchange requires there be at least 100 shareholders,
with 25% of shares to be held by the general public on the normal market,
with only 10% in the Unlisted Securities Market (USM) required to be
publicly held.
PLACING: The LSE lets companies raise up to £15
million in the main market and £5 million in the USM. The new capital is
generated by an issuing house, usually a merchant bank to its clients. The
public still has to hold 25% and 10% depending on which market.
AN OFFER FOR SALE: This involves the disposal of all
or existing shares on the LSE. There is limit to the size of capital which
can be raised.
AN OFFER BY SUBSCRIPTION (Prospectus Issue): This
involves the company itself offering shares to the public. The issue may or
may not be underwritten by an underwriter. The company may or may not engage
in the services of a stockbroker for advice and/or organise the insurance of
the share issue.
AN OFFER FOR SALE BY TENDER: The tender offer
involves an offer to the general public to bid for shares with a minimum
subscription quantity/price. After the closing date, the organisers will set
a closing quantity/price which benefits the company the most.