What is a New Issue?
A new issue is a never-before-offered security.
How Does a New Issue Work?
Let's assume that Company ABC makes a public offering of shares in order to finance its business expansion. Company ABC, the issuer of the stock, must file a prospectus with the Securities and Exchange Commission (SEC) summarizing the stock offering, associated risk and financial information of the company. Because Company ABC has never issued stock before, the offering is a new issue.
Initial public offerings are the most common new issues. However, companies, governments or other entities also can make new issues of bonds, notes, commercial paper or preferred stock.
Why Does a New Issue Matter?
Issuers are legally responsible for the securities they issue. To fulfill their legal obligations to investors, they must follow strict reporting standards as set by the SEC, including quarterly reporting of financial performance and conditions, material developments and all operational activities required by regulations in the jurisdictions of the security.