Issue price
In banking, the issue price is the name of a stock exchange price at which newly issued securities are offered to the public.
General
The issue price is the first price of a newly issued security on the so-called primary market . It is not determined randomly, but is part of the issuing concept worked out between the issuer and its bank . It also includes the company valuation and the rating of the issuer. Both are the main criteria for determining the issue price. Not only in equities but also in straight bonds this main criteria play a role, as in the latter, the issue yield on the primary market, not only from the market rate , but also on the creditworthiness of the debtor depends. The issue price is determined at the same time as the placement volume (the size of the issue) and the consortium quota for members of the issue consortium .
Determination of the issue price
When determining the issue price, the interests of the issuer, banks and the public collide. While issuers want to achieve the highest possible issue proceeds (they receive higher equity with equity issues or higher liquidity with bonds ), investors are interested in the lowest possible issue price because they expect greater opportunities for profit potential on the secondary market ( profit-taking ). The issuing syndicate takes on an intermediary role, as on the one hand it can collect high commissions when the issue price is high, but on the other hand it has lower placement risks when the issue price is low. In the case of stocks in particular, there is a tendency towards underpricing , i.e. setting a lower price on the primary market than can be achieved on the secondary market.
Effects of the issue price
After the issue, the issue price determines the amount of the issue proceeds that will flow to the issuer. In the case of shares, the under- par issue is prohibited ( Section 9 (2) AktG), so that the stock corporation must receive issue proceeds at least equal to the nominal value and must be accounted for as share capital ( Section 266 (3) AI HGB). In the case of an over-par issue , not only share capital but also equity in the form of the capital reserve flows in, as the premium must be accounted for in this balance sheet item ( Section 272 (2) HGB). The higher the issue price of bonds, the more liquidity the bond debtor can collect and - in the case of under-par issues - the lower the interest expense to be posted from the discount .
See also
Individual evidence
- ↑ Konrad Bösl, IPO Practice , 2013, p. 149.
- ↑ Konrad Bösl, IPO Practice , 2013, p. 142.
- ↑ Jay R. Ritter / Roger G. Ibbotson, Initial Public Offerings , in: North-Holland Handbooks of Operations Research and Management Science, Vol. 9, 1995, p. 993 ff.
